##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended May 28, 2005
 OR
 o
    
    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 1-11165
 INTERSTATE BAKERIES CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    43-1470322(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)12 East Armour Boulevard,Kansas City, Missouri
    
    64111(Address of principal executive offices)
    
    (Zip Code)
 (816) 502-4000
Registrants telephone number, including area code
 Securities registered pursuant to Section 12(b) of the Act: None
 Securities
registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value
Preferred Stock Purchase Rights
 o þ
 o þ
 o þ
 o
  p þ p
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE: None




---



##### Table of Contents



EXPLANATORY NOTE
  2




---



##### 



INDEX
 Page NumberFORWARD-LOOKING STATEMENTS
    
    
    4PART I
    
    
    7ITEM 1. BUSINESS
    
    
    7ITEM 1A. RISK FACTORS
    
    
    14ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    24ITEM 2. PROPERTIES
    
    
    24ITEM 3. LEGAL PROCEEDINGS
    
    
    25ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    30PART II
    
    
    30ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
    
    30ITEM 6. SELECTED FINANCIAL DATA
    
    
    32ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    33ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    52ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    106ITEM 9A. CONTROLS AND PROCEDURES
    
    
    106ITEM 9B. OTHER INFORMATION
    
    
    115PART III
    
    
    116ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    116ITEM 11. EXECUTIVE COMPENSATION
    
    
    119ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    127ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    129ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    130PART IV
    
    
    132ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE
    
    
    132SubsidiariesCertification of Antonio C. Alvarez II pursuant to Rule 13a-14(a)/15d-14(a)Certification of Ronald B. Hutchison pursuant to Rule 13a-14(a)/15d-14(a)Certification of Antonio C. Alvarez II pursuant to 18 U.S.C. Section 1350Certification of Ronald B. Hutchison pursuant to U.S.C. Section 1350
  3




---



##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    our ability to continue as a going concern;
    
    our ability to obtain court approval with respect to motions filed by us from time to
time in the Chapter 11 proceeding (as described below);
    
    our ability to operate pursuant to the covenants, terms and
certifications of the Revolving Credit Agreement, or DIP
facility, (as described in Item 1 below);
    
    our ability to negotiate an extension (if necessary) or refinance our DIP facility,
which, pursuant to an extension, expires on June 2, 2007;
    
    our ability to develop, propose, confirm and consummate one or more plans of
reorganization with respect to the Chapter 11 proceeding;
    
    risks associated with failing to obtain court approval for one or more extensions to
the exclusivity period for us to propose and confirm one or more plans of reorganization
or with third parties seeking and obtaining court approval to terminate or shorten any
such exclusivity period, for the appointment of a Chapter 11 trustee or to convert the
Chapter 11 proceeding to a Chapter 7 proceeding;
    
    risks associated with our restructuring process, including the risks associated with
achieving the desired savings in connection with our profit center restructuring and
bakery and route consolidations (as described below);
    
    potential adverse publicity;
    
    our ability to obtain and maintain adequate terms with vendors and service providers;
    
    the potential adverse impact of the Chapter 11 proceeding on our liquidity or results of operations;
    
    risks associated with product price increases, including the risk that such actions
will not effectively offset inflationary cost pressures and may adversely impact sales of
our products;
    
    the effectiveness of our efforts to hedge our exposure to price increases with respect
to various ingredients and energy;
    
    our ability to finalize, fund and execute a going-forward business plan;
    
    our ability to attract, motivate and/or retain key executives and employees;
    
    changes in our relationship with employees and the unions that represent them;
    
    increased costs and uncertainties related to periodic renegotiation of union contracts;
    
    the results of a Securities and Exchange Commission, or SEC, investigation concerning
our financial statements following our announcement that the Audit Committee of our Board
of Directors had retained independent counsel to investigate our manner of setting its
workers compensation and other reserves;
    
    the delayed filing with the SEC of our Annual Reports on Form 10-K and of our Quarterly
Reports on Form 10-Q;
    
    successful resolution of material weaknesses in our internal controls;
 4




---



##### Table of Contents




    
    resolution of any deficiencies and implementation of software updates with respect to
our financial reporting systems;
    
    changes to dietary guidelines;
    
    the continuing effects of a low carbohydrate diet trend;
    
    the performance of our recent new product introductions, including the success of such
new products in achieving and retaining market share;
    
    commodity and energy costs; and
    
    the outcome of legal proceedings to which we are or may become a party.
  Bankruptcy-Related Factors
 
    
    our ability to evaluate various alternatives including, but not limited to, the sale of
some or all of our assets, infusion of capital, debt restructuring and the filing and
ultimate approval of a plan of reorganization with the Bankruptcy Court (as described
below), or any combination of these options;
    
    our ability to develop and implement a successful plan of reorganization in the Chapter
11 process;
    
    our ability to operate our business under the restrictions imposed by the Chapter 11
process and in compliance with the limitations contained in the debtor-in-possession
credit facility;
    
    the instructions, orders and decisions of the bankruptcy court and other effects of
legal and administrative proceedings, settlements, investigations and claims;
    
    changes in our relationships with suppliers and customers, including the ability to
maintain these relationships and contracts that are critical to our operations, in light
of the Chapter 11 process;
    
    the significant time that will be required by management to structure and implement a
plan of reorganization as well as to evaluate various alternatives including, but not
limited to, the sale of some or all of our assets, infusion of capital and debt
restructuring or any combination of these options, as well as our restructuring plan;
    
    our reliance on key management personnel, including the effects of the Chapter 11
process on our ability to attract and retain key management personnel;
    
    our ability to successfully reject unfavorable contracts and leases; and
    
    the duration of the Chapter 11 process.
 General Factors
 
    
    the availability of capital on acceptable terms in light of the various factors
discussed herein, including our reorganization under the Chapter 11 process;
    
    the availability and cost of raw materials, packaging, fuels and utilities, and the
ability to recover these costs in the pricing of products, improved efficiencies and other
strategies;
    
    increased pension, health care, workers compensation and other employee costs;
    
    actions of competitors, including pricing policy and promotional spending;
    
    increased costs, delays or deficiencies related to restructuring activities;
    
    the effectiveness of advertising and marketing spending;
    
    the effectiveness and adequacy of our information and data systems;
 5




---



##### Table of Contents




    
    changes in general economic and business conditions (including in the bread and sweet
goods markets);
    
    costs associated with increased contributions to single employer, multiple employer or
multi-employer pension plans;
    
    any inability to protect and maintain the value of our intellectual property rights;
    
    future product recalls or food safety concerns;
    
    further consolidation in the retail food industry;
    
    changes in consumer tastes or eating habits;
    
    costs associated with environmental compliance and remediation;
    
    increased costs and uncertainties related to periodic renegotiation of union contracts;
    
    obligations and uncertainties with respect to the American Bakers Association Retirement Plan;
    
    the impact of any withdrawal liability arising under our multi-employer pension plans
as a result of prior actions or current consolidations;
    
    actions of governmental entities, including regulatory requirements;
    
    acceptance of new product offerings by consumers and our ability to expand existing brands;
    
    the performance of our recent new product introductions;
    
    the effectiveness of hedging activities;
    
    expenditures necessary to carry out cost-saving initiatives and savings derived from
these initiatives;
    
    changes in our business strategies;
    
    unexpected costs or delays incurred in connection with our previously announced and
other future facility closings;
    
    bankruptcy filings by customers;
    
    changes in our relationship with employees and the unions that represent them;
    
    the outcome of legal proceedings to which we are or may become a party, including any
litigation stemming from our restatement of the first, second and third quarters of fiscal
2004, our sale of convertible notes on August 12, 2004 or events leading up to our filing
of a voluntary petition for protection under Chapter 11 of the Bankruptcy Code;
    
    business disruption from terrorist acts, our nations response to such acts and acts of war; and
    
    other factors.
   6




---



##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 General
    Proceedings Under Chapter 11 of the Bankruptcy Code
   7




---



##### Table of Contents




    
    authorize us to pay pre-petition and post-petition employee wages and salaries and
related benefits during our restructuring under Chapter 11;
    
    authorize us to pay trust fund taxes in the ordinary course of business, including
pre-petition amounts; and
    
    authorize the continued use of our cash management systems.
      8




---



##### Table of Contents




    
    with respect to each impaired class of creditors and equity holders, each holder in such
class has accepted the plan or will, pursuant to the plan, receive at least as much as such
holder would receive in a liquidation;
    
    each impaired class of creditors and equity holders has accepted the plan by the
requisite vote (except as described in the following sentence); and
    
    confirmation of the plan is not likely to be followed by a liquidation or the need for
further financial reorganization unless the plan proposes such liquidation or
reorganization.
    Changes in Management
   9




---



##### Table of Contents



Company History
   Financial Information about Segments
  Wholesale Operations
 Retail Operations
   Products and Brands
  Category
    
    Our National Brands
    
    Our Regional BrandsBreads, Rolls and Buns(White, variety, crusty, reduced-calorie and bagels)
    
    Wonder
    
    Bunny*Home Pride
    
    ButternutBakers Inn
    
    MeritaBread du Jour
    
    MillbrookBeefsteak
    
    EddysCottons Holsum*Holsum*J.J. NissenSunbeam*SweetheartDi CarloColomboRoman Meal*Sun-Maid*Fresh Baked Sweet Goods
    
    Hostess
    
    Dolly Madison(Donuts, sweet rolls, snack pies and snack cakes)
    
    Twinkies
    
    Drakes
 10




---



##### Table of Contents



Category
    
    Our National Brands
    
    Our Regional BrandsDing Dongs
    
    Devil DogsHoHos
    
    Ring DingsSuzy-Qs
    
    YodelsYankee DoodlesZingersOther
    
    Mrs. Cubbisons(Croutons and stuffing mix)
    
    Marie Callenders*
 
 *
    
    Licensed brands   TM
 Marketing and Distribution
     11




---



##### Table of Contents



Sources and Availability of Raw Materials
   Employees
  Competition
  12




---



##### Table of Contents



Governmental Regulation; Environmental Matters
     13




---



##### Table of Contents



Availability of Reports; Website Access
  
 ITEM 1A. RISK FACTORS
  We face significant challenges and uncertainties in connection with our bankruptcy
reorganization.
    We face uncertainty regarding the adequacy of our capital resources, including liquidity, and
have limited access to additional financing.
  14




---



##### Table of Contents



Our potential inability to implement our restructuring plan, or to realize its anticipated
benefits, could adversely affect our results of operations and financial condition.
   15




---



##### Table of Contents



Terms of collective bargaining agreements and labor disruptions could adversely impact our
results of operations.
  The Chapter 11 process and the DIP Facility impose restrictions on the conduct of our
business.
   16




---



##### Table of Contents



Our financial statements assume we can continue as a going concern.
    We are no longer listed on the New York Stock Exchange and the market in our common stock is
highly speculative and may not continue.
  17




---



##### Table of Contents



We may face deregistration proceedings under Section 12(j) of the
Exchange Act.
  Our internal control over financial reporting was not effective
as of May 28, 2005 or June 3, 2006 and
weaknesses in our internal controls and procedures could adversely affect our financial condition.
   Our reorganization will require substantial effort by management and may impact our ability to
attract, retain and compensate key employees.
  Declining demand for our products could have adverse effects on our financial results.
  18




---



##### Table of Contents



Dietary
Guidelines for Americans
  We may have difficulty in maintaining relationships and material contracts with our suppliers.
  An investigation by the SEC regarding the restatement of our financial statements and related
potential litigation could adversely impact our business.
   19




---



##### Table of Contents



Increases in employee and employee-related costs could have adverse effects on our financial
results.
  Increases in prices and shortages of raw materials, fuels and utilities could cause our costs
to increase.
   Price increases could reduce demand for our products.
  Competition could adversely impact our results of operations.
  20




---



##### Table of Contents



We may be obligated to make additional contributions or incur withdrawal liability, to
multi-employer pension plans.
      21




---



##### Table of Contents



Future cash contribution obligations to the American Bakers Association Retirement Plan, or
the ABA Plan, are expected to significantly exceed previous contributions to the ABA Plan.
  We rely on the value of our brands, and the costs of maintaining and enhancing the awareness
of our brands are increasing.
  Economic downturns could cause consumers to shift their food purchases from our branded
products to lower priced items.
  Inability to anticipate changes in consumer preferences may result in decreased demand for
products.
  Our intellectual property rights are valuable and any inability to protect them could dilute
our brand image and adversely affect our business.
  22




---



##### Table of Contents



Further consolidation in the retail food industry may adversely impact profitability.
  Future product recalls or safety concerns could adversely impact our business and financial
condition and results of operations.
    Costs associated with environmental compliance and remediation could adversely impact our
operations.
   23




---



##### Table of Contents



Government regulation could adversely impact our operations.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS.
  
 ITEM 2. PROPERTIES
 Bakeries
  Birmingham, Alabama
    
    Schiller Park, Illinois
    
    Charlotte, North Carolina *Anchorage, Alaska
    
    Columbus, Indiana
    
    Rocky Mount, North CarolinaGlendale, California
    
    Indianapolis, Indiana
    
    Akron, OhioLos Angeles, California (3)
    
    Davenport, Iowa *
    
    Cincinnati, OhioOakland, California
    
    Waterloo, Iowa
    
    Columbus, OhioPomona, California
    
    Emporia, Kansas
    
    Defiance, OhioSacramento, California
    
    Lenexa, Kansas
    
    Northwood, OhioSan Diego, California
    
    Alexandria, Louisiana
    
    Tulsa, OklahomaSan Francisco, California (2) *
    
    Biddeford, Maine
    
    Philadelphia, PennsylvaniaDenver, Colorado
    
    New Bedford, Massachusetts *
    
    Knoxville, TennesseeJacksonville, Florida
    
    Boonville, Missouri
    
    Memphis, TennesseeMiami, Florida *
    
    Springfield, Missouri
    
    Ogden, UtahOrlando, Florida
    
    St. Louis, Missouri
    
    Salt Lake City, UtahColumbus, Georgia
    
    Billings, Montana
    
    Lakewood, Washington *Decatur, Illinois
    
    Henderson, Nevada
    
    Seattle, WashingtonHodgkins, Illinois
    
    Wayne, New JerseyPeoria, Illinois
    
    Jamaica, New York
 24




---



##### Table of Contents



Other Properties
  
 ITEM 3. LEGAL PROCEEDINGS
    25




---



##### Table of Contents



26




---



##### Table of Contents



27




---



##### Table of Contents



28




---



##### Table of Contents



Accounting for Contingencies
 29




---



##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    Stock Price
 Fiscal Year
    
    Quarter
    
    High
    
    Low
    
    Cash Dividends2005
    
    
    1
    
    
    $
    11.05
    
    
    $
    7.50
    
    
    
    2
    
    
    
    8.19
    
    
    
    2.05
    
    
    
    3
    
    
    
    6.75
    
    
    
    4.05
    
    
    
    4
    
    
    
    6.63
    
    
    
    4.75
    
    
    
    2004
    
    
    1
    
    
    $
    13.60
    
    
    $
    10.16
    
    
    $
    0.072
    
    
    
    15.85
    
    
    
    12.60
    
    
    
    0.073
    
    
    
    15.91
    
    
    
    13.35
    
    
    
    0.074
    
    
    
    15.96
    
    
    
    10.26
    
    
    
    
   30




---



##### Table of Contents



Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  Issuer Purchases of Equity Securities
 Total Number of
    
    Maximum Number (orShares (or Units)
    
    Approximate DollarPurchased as Part
    
    Value) of Shares (orTotal Number of
    
    Average Price
    
    of Publicly
    
    Units) that May Yet BeShares (or Units)
    
    Paid per Share
    
    Announced Plans
    
    Purchased Under thePeriod
    
    Purchased
    
    (or Unit)
    
    or Programs
    
    Plans or ProgramsPeriod 1May 30-June 26, 2004
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    7,424,596Period 2June 27-July 24, 2004
    
    
    4,235
    
    
    $
    10.54
    
    
    
    4,235
    
    
    
    7,420,361Period 3July 25-Aug 21, 2004
    
    
    17
    
    
    $
    8.37
    
    
    
    17
    
    
    
    7,420,344Period 4Aug 22-Sept 18, 2004
    
    
    7
    
    
    $
    5.70
    
    
    
    7
    
    
    
    7,420,337Period 5Sept 19-Oct 16, 2004 (A)
    
    
    91
    
    
    $
    4.07
    
    
    
    91
    
    
    
    7,420,246Period 6Oct 17-Nov 13, 2004
    
    
    76
    
    
    $
    4.08
    
    
    
    76
    
    
    
    7,420,170Period 7Nov 14-Dec 11, 2004
    
    
    13
    
    
    $
    5.85
    
    
    
    13
    
    
    
    7,420,157Period 8Dec 12, 2004-Jan 8, 2005
    
    
    18
    
    
    $
    6.11
    
    
    
    18
    
    
    
    7,420,139Period 9Jan 9-Feb 5, 2005
    
    
    20
    
    
    $
    5.79
    
    
    
    20
    
    
    
    7,420,119Period 10Feb 6-March 5, 2005
    
    
    25
    
    
    $
    5.33
    
    
    
    25
    
    
    
    7,420,094Period 11March 6-April 2, 2005
    
    
    14
    
    
    $
    5.49
    
    
    
    14
    
    
    
    7,420,080Period 12April 3-April 30, 2005 (B)
    
    
    23,224
    
    
    $
    6.28
    
    
    
    23,224
    
    
    
    7,396,856Period 13May 1-May 28, 2005
    
    
    14
    
    
    $
    5.42
    
    
    
    14
    
    
    
    7,396,842Total
    
    
    27,754
    
    
    $
    6.92
    
    
    
    27,754
    
    
    
    7,396,842
 
 (A)
    
    Except as otherwise noted, repurchases made after the Companys Chapter 11 Bankruptcy
Petition Date on September 24, 2004, result from the repurchase of fractional shares upon
issuance of certificates representing stock held in the Employee Stock Purchase Plan. This
plan was terminated in conjunction with the Bankruptcy filing in September 2004. 31




---



##### Table of Contents



(B)
    
    On April 14, 2005, the Company permitted certain former executives to use shares of stock
to meet their federal income tax obligations arising from vesting of restricted stock that
they were not permitted to disclaim due to the structure of the restricted stock awards and
timing of their respective retirements. Such use of stock is reflected as a repurchase of
stock in this chart. 
 ITEM 6. SELECTED FINANCIAL DATA
 INTERSTATE BAKERIES CORPORATION
FIVE-YEAR SUMMARY OF FINANCIAL DATA
 Fifty-Two Weeks EndedMay 28,
    
    May 29,
    
    May 31,
    
    June 1,2005
    
    2004
    
    2003
    
    2002
    
    June 2,(1)(2)(5)
    
    (3)(5)
    
    (4)(5)
    
    (5)(6)
    
    2001(dollars in thousands, except per share data)Statements of OperationsNet sales
    
    $
    3,403,505
    
    
    $
    3,467,562
    
    
    $
    3,525,780
    
    
    $
    3,531,623
    
    
    $
    3,474,643Operating income (loss)
    
    
    (335,536
    )
    
    
    (18,326
    )
    
    
    70,276
    
    
    
    143,838
    
    
    
    142,394% of net sales
    
    
    (9.8
    )%
    
    
    (0.5
    )%
    
    
    2.0
    %
    
    
    4.0
    %
    
    
    4.1
    %Net income (loss)
    
    $
    (379,280
    )
    
    $
    (33,370
    )
    
    $
    18,727
    
    
    $
    67,100
    
    
    $
    57,843% of net sales
    
    
    (11.1
    )%
    
    
    (1.0
    )%
    
    
    0.5
    %
    
    
    1.9
    %
    
    
    1.7
    %Earnings (loss) per share:Basic
    
    $
    (8.43
    )
    
    $
    (0.74
    )
    
    $
    0.42
    
    
    $
    1.34
    
    
    $
    1.07Diluted
    
    
    (8.43
    )
    
    
    (0.74
    )
    
    
    0.41
    
    
    
    1.31
    
    
    
    1.07Common stock dividends per share
    
    
    
    
    
    
    0.21
    
    
    
    0.28
    
    
    
    0.28
    
    
    
    0.28Weighted average common shares outstanding:Basic
    
    
    45,010
    
    
    
    44,868
    
    
    
    44,599
    
    
    
    50,091
    
    
    
    54,110Diluted
    
    
    45,010
    
    
    
    44,868
    
    
    
    45,185
    
    
    
    51,299
    
    
    
    54,296Balance SheetsTotal assets
    
    $
    1,398,650
    
    
    $
    1,673,797
    
    
    $
    1,697,349
    
    
    $
    1,654,716
    
    
    $
    1,673,818Long-term debt, excluding current maturities (7)
    
    
    
    
    
    
    10,362
    
    
    
    536,788
    
    
    
    588,610
    
    
    
    561,661Stockholders equity (deficit)
    
    
    (116,924
    )
    
    
    261,708
    
    
    
    290,430
    
    
    
    274,343
    
    
    
    368,607
 
 (1)
    
    Fiscal 2005 operating income includes goodwill and other intangible asset impairments of approximately $229.5
million, or $5.10 per diluted share; restructuring charges of approximately $54.3 million, or $1.21 per diluted
share, relating to the closures of five bakeries, a general workforce reduction and other cost reductions;
settlement of class action litigation of approximately $ 8.7 million, or $0.19 per diluted share; and a
curtailment loss from the suspension of our Supplemental Employee Retirement Plan of $12.4 million or $0.28 per
diluted share.(2)
    
    Fiscal 2005 net loss includes a tax valuation allowance adjustment of $5.6 million, or $0.13 per diluted share.(3)
    
    Fiscal 2004 operating income includes restructuring charges of approximately $12.1 million, or $0.17 per
diluted share, relating to the closures of three bakeries, severance costs in connection with the
centralization of certain finance and data maintenance administrative functions and the relocation of certain
key management employees in conjunction with our new more centralized organizational structure and settlement
of class action litigation of approximately $3.0 million, or $0.04 per diluted share.(4)
    
    Fiscal 2003 operating income includes restructuring charges of approximately $9.9 million, or $0.14 per diluted
share, relating to certain closings and restructurings of bakeries and bakery outlets and other charges of
approximately $3.6 million, or $0.05 per diluted share, relating to the common stock award made on October 1,
2002 to IBCs retiring Chief Executive Officer.(5)
    
    Fiscal 2005, 2004, 2003, and 2002 results include the effect of adopting Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, which eliminated the amortization of purchased
goodwill and other intangible assets with indefinite useful lives. 32




---



##### Table of Contents



(6)
    
    Fiscal 2002 operating income includes other charges of $25.7 million, amounting to $0.31 per diluted share,
related to the closure of a bakery and the settlement of employment discrimination litigation.(7)
    
    In fiscal 2005 and 2004, we have reflected the total amount due under our senior secured credit facility
agreement as amounts payable within one year due to our default under this facility. See Note 1. Voluntary
Chapter 11 Filing to our consolidated financial statements regarding going concern considerations. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 COMPANY OVERVIEW
        33




---



##### Table of Contents



RECENT DEVELOPMENTS
    Review of Treatment of American Bakers Association Retirement Plan
  Calculation of Workers Compensation Claims
  34




---



##### Table of Contents



Profit Center Review
      35




---



##### Table of Contents



Labor Union Negotiations
  OVERVIEW OF CERTAIN TRENDS AND EVENTS AFFECTING OPERATIONS, FINANCIAL POSITION AND LIQUIDITY
  36




---



##### Table of Contents



37




---



##### Table of Contents



38




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
    Reserves for self-insurance and postretirement benefits.
  Pension obligations.
  39




---



##### Table of Contents



Long-lived assets.
 Goodwill and
Other Intangible Assets
   Derivative instruments.
 Restructuring charges.
 Accounting for
Costs Associated with Exit or Disposal Activities, Employers Accounting for Postemployment Benefits  an
amendment of FASB Statements No. 5 and 43 Accounting for Contingencies
 Income taxes.
 40




---



##### Table of Contents



Legal reserves.
 Environmental liabilities.
 Liabilities subject to compromise.
 Reorganization charges.
 NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS
 Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction
and Qualified Production Activities Provided by the American Jobs Creation Act of 2004 Accounting for Income Taxes
 Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003
 Employers Disclosures about Pensions and Other
Postretirement Benefits  an amendment of FASB Statements No. 87, 88, and 106
 41




---



##### Table of Contents



RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Accounting for Uncertainty in
Income Taxes  an interpretation of FASB Statement No. 109
 Accounting for Rental Costs Incurred during a
Construction Period
 Accounting Changes and Error Corrections Accounting Changes Reporting Accounting Changes in Interim Financial Statements
 Accounting for Conditional Asset Retirement Obligations
 an interpretation of FASB Statement No. 143
 Share-Based Payment Accounting for Stock Issued to Employees
 42




---



##### Table of Contents



Exchanges of Nonmonetary Assets  An Amendment of
APB Opinion No. 29
 Inventory Costs  An Amendment of ARB No. 43,
Chapter 4 .
 43




---



##### Table of Contents



RESULTS OF OPERATIONS
  Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of products sold (exclusive of items shown below)
    
    
    50.7
    
    
    
    50.0
    
    
    
    49.3Selling, delivery and administrative expenses
    
    
    47.9
    
    
    
    47.4
    
    
    
    45.5Restructuring and other charges
    
    
    1.6
    
    
    
    0.3
    
    
    
    0.4Depreciation and amortization
    
    
    2.6
    
    
    
    2.6
    
    
    
    2.7Loss on sale or abandonment of assets
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.1Goodwill impairment
    
    
    6.3
    
    
    
    
    
    
    
    Other intangible assets impairment
    
    
    0.4
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (9.8
    )
    
    
    (0.5
    )
    
    
    2.0Reorganization charges
    
    
    1.2
    
    
    
    
    
    
    
    Interest expense  net
    
    
    1.2
    
    
    
    1.1
    
    
    
    1.2Income (loss) before income taxes
    
    
    (12.2
    )
    
    
    (1.6
    )
    
    
    0.8Provision (benefit) for income taxes
    
    
    (1.1
    )
    
    
    (0.6
    )
    
    
    0.3Net income (loss)
    
    
    (11.1
    )%
    
    
    (1.0
    )%
    
    
    0.5
    %
 Fiscal 2005 Compared to Fiscal 2004
 Net sales.
 Gross
profit.
 Selling, delivery and administrative expenses.
 Restructuring and other charges.
 44




---



##### Table of Contents



Goodwill and other intangible assets impairment.
 Operating loss.
 Reorganization charges.
 Interest expense.
 Provision for income taxes.
 45




---



##### Table of Contents



Fiscal 2004 Compared to Fiscal 2003
 Net sales.
 Gross profit.
 Selling, delivery and administrative expenses.
 Restructuring and other charges.
  Operating income (loss).
 Interest expense.
 46




---



##### Table of Contents



Provision for income taxes.
 CASH RESOURCES AND LIQUIDITY
 CASH FLOWS
  Cash from operating activities.
 Cash used in investing activities.
 Cash used in financing activities.
 SOURCES OF LIQUIDITY AND CAPITAL
   47




---



##### Table of Contents



Voluntary Chapter 11 Bankruptcy Filing.
     48




---



##### Table of Contents



Contractual Obligations.
 49




---



##### Table of Contents



Payments Due By Fiscal Year Under Certain Contractual Obligations (a)(g)(dollars in thousands)Senior Secured
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnconditionalDIP
    
    
    Credit Facility
    
    
    Subordinated
    
    
    Capital
    
    
    Operating
    
    
    PurchaseFiscal Years Ending
    
    Total
    
    
    Facility (b)
    
    
    (c)
    
    
    Notes (d)
    
    

Leases (e)(g)
    
    
    Leases (f)(g)
    
    
    Obligations (h)2006
    
    $
    716,066
    
    
    $
    
    
    
    $
    476,402
    
    
    $
    100,000
    
    
    $
    11,514
    
    
    $
    42,097
    
    
    $
    86,0532007
    
    
    48,233
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,842
    
    
    
    20,3912008
    
    
    35,161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,036
    
    
    
    19,1252009
    
    
    22,822
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,765
    
    
    
    14,0572010
    
    
    9,330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,162
    
    
    
    5,168Thereafter
    
    
    10,236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,366
    
    
    
    3,870Total
    
    $
    841,848
    
    
    $
    
    
    
    $
    476,402
    
    
    $
    100,000
    
    
    $
    11,514
    
    
    $
    105,268
    
    
    $
    148,664
 
 (a)
    
    The commitments listed herein include significant pre-petition
obligations. Under the Bankruptcy Code, actions to collect
pre-petition indebtedness are stayed and our other contractual
obligations may not be enforced against us. Therefore, the
commitments shown above may not reflect actual cash outlays in
future periods. In addition, under the Bankruptcy Code, we may
reject certain executory contracts and leases, thus eliminating
all or part of those future obligations.(b)
    
    On September 23, 2004, we entered into a debtor-in-possession
Revolving Credit Agreement (the DIP Facility) which provides for
a $200.0 million commitment (the Commitment) of financing to
fund our post-petition operating expenses, supplier and employee
obligations. The DIP Facility, as amended from time to time,
provides for a secured revolving line of credit through June 2,
2007. The Commitment also may be used, with certain restrictions,
for the issuance of letters of credit in the aggregate amount of
$150.0 million of which $45.6 million was utilized at May 28,
2005. As of May 28, 2005, there were no borrowings outstanding
under the revolving credit facility and we had $154.4 million
available under the DIP Facility (of which up to $79.4 million
could be used for additional letters of credit).(c)
    
    Borrowings under our variable rate senior secured credit facility
are secured by all of our accounts receivable and a majority of
our owned real property, intellectual property and equipment. The
revolving credit line had a total capacity of $244.2 million of
which $172.3 million was utilized to support the issuance of
letters of credit and $71.9 million was borrowed. At May 28,
2005, there was no availability under the revolving credit line
for additional borrowings or letters of credit. At May 28, 2005,
we also had an aggregate $404.5 million borrowed under the Tranche
A, B, and C term loans provided under the variable rate senior
secured credit facility. We have presented this facility in our
May 28, 2005 financial statements as amounts payable within one
year due to our default under this facility.(d)
    
    On August 12, 2004, we issued $100.0 million aggregate principal
amount of our 6.0% senior subordinated convertible notes due
August 15, 2014 in a private placement. The notes are convertible
at the option of the holder under certain circumstances into
shares of our common stock at an initial conversion rate of
98.9854 shares per $1,000 principal amount of notes (an initial
conversion price of $10.1025 per share), subject to adjustment.
As these notes are unsecured, they are included in liabilities
subject to compromise in our consolidated balance sheet at May 28,
2005.(e)
    
    During fiscal 2003 we entered into a capital lease to acquire
hand-held computers and related equipment for use in our bakery
delivery system and recorded a capital lease obligation of
approximately $11.7 million to finance the purchase of this
equipment. At May 28, 2005 we were in default on this lease. In
March of 2006, the bankruptcy court approved a motion to transfer
from the lessor to us all right, title and interest in this
leased equipment for a general unsecured claim. Accordingly, the
capital lease obligation on this equipment at May 28, 2005 in the
amount of $5.7 million has been reclassified to Liabilities
Subject to Compromise.(f)
    
    At May 28, 2005, we had in place various operating leases for
equipment on which at the end of the lease term we had guaranteed
a buyout price, or residual value. FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees
Including Indirect Guarantees of Indebtedness of Others, on its
effective date requires us to disclose the undiscounted maximum
potential liability of all guaranteed lease residual values and to
record a liability for the fair value of such guarantees. The
effective date of this pronouncement was for all leases entered
into or modified after December 31, 2002. At May 28, 2005, the
maximum potential liability for all lease residual values
guaranteed prior and subsequent to the effective date was $6.6
million and $4.6 million respectively. At May 28, 2005, we had an
unamortized liability for the fair value of all guaranteed lease
residual values that were entered into or modified subsequent to
the effective date of $0.2 million.(g)
    
    Subsequent to May 28, 2005, we rejected unexpired
capital and operating leases, which resulted in a reduction of
approximately $0.9 million and $7.7 million, respectively, in the
contractual obligations presented above.(h)
    
    The unconditional purchase obligations represent obligations as of
May 28, 2005. This includes items such as ingredients, packaging,
third party agreements to perform certain functions and other
obligations. 50




---



##### Table of Contents



OFF-BALANCE SHEET FINANCING
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Commodity prices.
 Interest rates.
 51




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 INDEX TO FINANCIAL STATEMENTS
 PageNumberReport of Independent Registered Public Accounting Firm
    
    
    53Consolidated Balance Sheets at May 28, 2005 and May 29, 2004
    
    
    54Consolidated Statements of Operations for the 52 weeks ended May 28, 2005, May 29, 2004, and May 31, 2003
    
    
    55Consolidated Statements of Cash Flows for the 52 weeks ended May 28, 2005, May 29, 2004, and May 31, 2003
    
    
    56Consolidated Statements of Stockholders Equity (Deficit) for the 52 weeks ended May 28, 2005, May 29, 2004, and May 31, 2003
    
    
    57Notes to Consolidated Financial Statements:1. Voluntary Chapter 11 Filing
    
    
    582. Description of Business and Significant Accounting Policies
    
    
    603. Property and Equipment
    
    
    674. Assets Held for Sale
    
    
    675. Lease Obligations
    
    
    686. Goodwill and Other Intangible Assets
    
    
    697. Debt
    
    
    718. Accrued Expenses and Other Liabilities
    
    
    739. Derivative Instruments
    
    
    7410. Liabilities Subject to Compromise
    
    
    7511. Employee Benefit Plans
    
    
    7612. Supplemental Executive Retirement Plan
    
    
    8313. Key Employee Retention Plan
    
    
    8414. Stock-Based Compensation
    
    
    8415. Restructuring Charges
    
    
    8616. Reorganization Charges
    
    
    9217. Income Taxes
    
    
    9218. Commitments and Contingencies
    
    
    9419. Stock Repurchases
    
    
    9920. Stockholder Rights Plan
    
    
    10021. Earnings (Loss) per Share
    
    
    10022. Comprehensive Income (Loss)
    
    
    10123. Segment Information
    
    
    10224. Subsequent Events
    
    
    10325. Quarterly Financial Information (Unaudited)
    
    
    105
 52




---



##### Table of Contents



53




---



##### Table of Contents



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED BALANCE SHEETS
 (dollars in thousands, except share data)
 May 28,
    
    
    May 29,2005
    
    
    2004ASSETSCurrent assetsCash
    
    $
    151,558
    
    
    $
    39,728Accounts receivable, less allowance for doubtful
accounts of $3,492 and $3,700, respectively
    
    
    176,781
    
    
    
    182,060Inventories
    
    
    69,431
    
    
    
    71,901Assets held for sale
    
    
    10,582
    
    
    
    452Other current assets
    
    
    83,850
    
    
    
    108,577Total current assets
    
    
    492,202
    
    
    
    402,718Property and equipment, net
    
    
    705,373
    
    
    
    812,925Goodwill
    
    
    
    
    
    
    215,346Other intangible assets
    
    
    162,043
    
    
    
    190,416Other assets
    
    
    39,032
    
    
    
    52,392Total assets
    
    $
    1,398,650
    
    
    $
    1,673,797LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Liabilities not subject to compromiseCurrent liabilitiesLong-term debt payable within one year
    
    $
    482,199
    
    
    $
    542,701Accounts payable
    
    
    101,141
    
    
    
    158,754Accrued expenses
    
    
    260,442
    
    
    
    275,354Total current liabilities
    
    
    843,782
    
    
    
    976,809Long-term debt
    
    
    
    
    
    
    10,362Other liabilities
    
    
    299,391
    
    
    
    311,183Deferred income taxes
    
    
    90,172
    
    
    
    113,735Total liabilities not subject to compromise
    
    
    1,233,345
    
    
    
    1,412,089Liabilities subject to compromise
    
    
    282,229
    
    
    
    Stockholders equity (deficit)Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 120,000,000 shares authorized, 81,579,000 shares issued,
45,337,000 and 45,381,000 shares outstanding, respectively
    
    
    816
    
    
    
    816Additional paid-in capital
    
    
    586,089
    
    
    
    586,616Retained earnings (loss)
    
    
    (14,394
    )
    
    
    364,886Treasury stock, 36,242,000 and 36,198,000 shares at cost, respectively
    
    
    (678,379
    )
    
    
    (679,016
    )Unearned restricted stock compensation
    
    
    (3,521
    )
    
    
    (6,982
    )Accumulated other comprehensive loss
    
    
    (7,535
    )
    
    
    (4,612
    )Total stockholders equity (deficit)
    
    
    (116,924
    )
    
    
    261,708Total liabilities and stockholders equity (deficit)
    
    $
    1,398,650
    
    
    $
    1,673,797
  54




---



##### Table of Contents



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollars in thousands, except per share data)
 Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003Net sales
    
    $
    3,403,505
    
    
    $
    3,467,562
    
    
    $
    3,525,780Cost of products sold (exclusive of items shown below)
    
    
    1,724,054
    
    
    
    1,733,303
    
    
    
    1,739,746Selling, delivery and administrative expenses
    
    
    1,630,921
    
    
    
    1,643,757
    
    
    
    1,605,512Restructuring charges
    
    
    54,293
    
    
    
    12,066
    
    
    
    9,910Other charges
    
    
    
    
    
    
    
    
    
    
    3,591Depreciation and amortization
    
    
    89,486
    
    
    
    91,024
    
    
    
    94,400Loss on sale or abandonment of assets
    
    
    10,744
    
    
    
    5,738
    
    
    
    2,345Goodwill impairment
    
    
    215,346
    
    
    
    
    
    
    
    Other intangible assets impairment
    
    
    14,197
    
    
    
    
    
    
    
    3,739,041
    
    
    
    3,485,888
    
    
    
    3,455,504Operating income (loss)
    
    
    (335,536
    )
    
    
    (18,326
    )
    
    
    70,276Other (income) expenseInterest expense (excluding unrecorded contractual
interest expense of $4,150, $0 and $0,
respectively)
    
    
    41,430
    
    
    
    37,543
    
    
    
    41,226Reorganization charges, net
    
    
    39,206
    
    
    
    
    
    
    
    Other income
    
    
    (353
    )
    
    
    (331
    )
    
    
    (87
    )80,283
    
    
    
    37,212
    
    
    
    41,139Income (loss) before income taxes
    
    
    (415,819
    )
    
    
    (55,538
    )
    
    
    29,137Provision (benefit) for income taxes
    
    
    (36,539
    )
    
    
    (22,168
    )
    
    
    10,410Net income (loss)
    
    $
    (379,280
    )
    
    $
    (33,370
    )
    
    $
    18,727Earnings (loss) per shareBasic
    
    $
    (8.43
    )
    
    $
    (0.74
    )
    
    $
    0.42Diluted
    
    $
    (8.43
    )
    
    $
    (0.74
    )
    
    $
    0.41
  55




---



##### Table of Contents



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollars in thousands)
 Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003Operating activitiesNet income (loss)
    
    $
    (379,280
    )
    
    $
    (33,370
    )
    
    $
    18,727Depreciation and amortization
    
    
    89,486
    
    
    
    91,024
    
    
    
    94,400Provision for deferred income taxes
    
    
    7,750
    
    
    
    (5,336
    )
    
    
    (12,764
    )Reorganization charges, net
    
    
    39,206
    
    
    
    
    
    
    
    Cash reorganization items
    
    
    (26,473
    )
    
    
    
    
    
    
    Non-cash interest expense  deferred debt fees
    
    
    5,616
    
    
    
    2,461
    
    
    
    1,778Non-cash interest on swap agreements
    
    
    (655
    )
    
    
    (3,217
    )
    
    
    3,872Non-cash common stock award
    
    
    
    
    
    
    
    
    
    
    3,591Non-cash restricted stock and deferred share compensation expense
    
    
    1,762
    
    
    
    2,146
    
    
    
    899Loss on sale, write-down or abandonment of assets
    
    
    34,302
    
    
    
    7,146
    
    
    
    2,997Write-off of goodwill and other intangibles
    
    
    242,410
    
    
    
    
    
    
    
    Write-down of software assets
    
    
    4,424
    
    
    
    
    
    
    
    Write-off prior service cost asset
    
    
    12,384
    
    
    
    
    
    
    
    Income tax benefit on employee stock transactions
    
    
    
    
    
    
    4
    
    
    
    2,113Change in operating assets and liabilitiesAccounts receivable
    
    
    5,279
    
    
    
    678
    
    
    
    14,345Inventories
    
    
    2,470
    
    
    
    2,780
    
    
    
    358Other current assets
    
    
    (6,586
    )
    
    
    (15,354
    )
    
    
    (9,331
    )Accounts payable and accrued expenses
    
    
    51,490
    
    
    
    25,817
    
    
    
    13,117Long-term portion of self insurance reserves
    
    
    19,439
    
    
    
    33,870
    
    
    
    5,381Other
    
    
    13,332
    
    
    
    3,650
    
    
    
    16,113Net cash from operating activities
    
    
    116,356
    
    
    
    112,299
    
    
    
    155,596Investing activitiesPurchases of property and equipment
    
    
    (29,175
    )
    
    
    (55,266
    )
    
    
    (100,737
    )Sale of assets
    
    
    4,156
    
    
    
    4,701
    
    
    
    6,475Acquisition of other intangible assets
    
    
    
    
    
    
    (198
    )
    
    
    (4,670
    )Acquisition and development of software assets
    
    
    (6,206
    )
    
    
    (14,758
    )
    
    
    (7,487
    )Other
    
    
    513
    
    
    
    (245
    )
    
    
    62Net cash used in investing activities
    
    
    (30,712
    )
    
    
    (65,766
    )
    
    
    (106,357
    )Financing activitiesReduction of long-term debt
    
    
    (75,647
    )
    
    
    (41,145
    )
    
    
    (46,495
    )Increase in revolving credit facility
    
    
    11,902
    
    
    
    
    
    
    
    Issuance of convertible bonds
    
    
    100,000
    
    
    
    
    
    
    
    Common stock dividends paid
    
    
    
    
    
    
    (9,479
    )
    
    
    (12,539
    )Stock option exercise proceeds
    
    
    
    
    
    
    776
    
    
    
    10,299Acquisition of treasury stock
    
    
    (192
    )
    
    
    (53
    )
    
    
    (189
    )Cash reorganization items
    
    
    (398
    )
    
    
    
    
    
    
    Debt fees
    
    
    (9,479
    )
    
    
    (1,865
    )
    
    
    (2,199
    )Net cash from (used in) financing activities
    
    
    26,186
    
    
    
    (51,766
    )
    
    
    (51,123
    )Net increase (decrease) in cash
    
    
    111,830
    
    
    
    (5,233
    )
    
    
    (1,884
    )Cash at the beginning of period
    
    
    39,728
    
    
    
    44,961
    
    
    
    46,845Cash at the end of period
    
    $
    151,558
    
    
    $
    39,728
    
    
    $
    44,961Cash payments (received)Interest
    
    $
    41,587
    
    
    $
    39,453
    
    
    $
    36,619Income taxes
    
    
    (41,506
    )
    
    
    (2,339
    )
    
    
    23,800Non-cash investing and financing activitiesIssuance of restricted stock
    
    
    221
    
    
    
    7,840
    
    
    
    Accrued deferred share award liability settled through equity issuance
    
    
    1,371
    
    
    
    
    
    
    
    7,061Equipment purchases financed with capital lease obligations
    
    
    409
    
    
    
    
    
    
    
    11,688Real estate financed with capital lease obligations
    
    
    
    
    
    
    
    
    
    
    1,888Long-term debt reduction from lease rejections
    
    
    1,560
    
    
    
    
    
    
    
    Asset
disposals from lease rejections
    
    
    1,189
    
    
    
    
    
    
    
    
 See accompanying notes. 56




---



##### Table of Contents



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 (dollars in thousands, except per share data)
 Treasury StockCommon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Held in Rabbi
    
    
    Unearned
    
    
    Accumulated
    
    
    TotalStock Issued
    
    
    Additional
    
    
    Retained
    
    
    Treasury Stock
    
    
    Trust
    
    
    Restricted
    
    
    Other
    
    
    StockholdersNumber
    
    
    Par
    
    
    Paid-in
    
    
    Earnings
    
    
    Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Stock
    
    
    Comprehensive
    
    
    Equityof Shares
    
    
    Value
    
    
    Capital
    
    
    (Loss)
    
    
    Shares
    
    
    Cost
    
    
    Shares
    
    
    Cost
    
    
    Compensation
    
    
    Loss
    
    
    (Deficit)Balance June 1, 2002
    
    
    80,684
    
    
    $
    807
    
    
    $
    568,315
    
    
    $
    401,547
    
    
    
    (36,858
    )
    
    $
    (691,369
    )
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (4,957
    )
    
    $
    274,343Comprehensive income (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,255
    )
    
    
    6,472Deferred share award
and related income tax
effect
    
    
    213
    
    
    
    2
    
    
    
    6,428
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,430Share award and related
income tax effect
    
    
    133
    
    
    
    1
    
    
    
    3,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,501Stock options exercised
and related income tax
benefit
    
    
    549
    
    
    
    6
    
    
    
    10,707
    
    
    
    
    
    
    
    90
    
    
    
    1,699
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,412Dividends paid  $0.28
per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,539
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,539
    )Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (189
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (189
    )Transfer of treasury
stock to rabbi trust
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    477
    
    
    
    8,946
    
    
    
    (477
    )
    
    
    (8,946
    )
    
    
    
    
    
    
    
    
    
    
    Balance May 31, 2003
    
    
    81,579
    
    
    
    816
    
    
    
    588,950
    
    
    
    407,735
    
    
    
    (36,298
    )
    
    
    (680,913
    )
    
    
    (477
    )
    
    
    (8,946
    )
    
    
    
    
    
    
    (17,212
    )
    
    
    290,430Comprehensive loss (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,370
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,600
    
    
    
    (20,770
    )Restricted share award
    
    
    
    
    
    
    
    
    
    
    (2,098
    )
    
    
    
    
    
    
    530
    
    
    
    9,938
    
    
    
    
    
    
    
    
    
    
    
    (7,840
    )
    
    
    
    
    
    
    Restricted share
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    800
    
    
    
    
    
    
    
    800Restricted share
forfeitures and other
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (4
    )
    
    
    (74
    )
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    (14
    )Stock options exercised
and related income tax
benefit
    
    
    
    
    
    
    
    
    
    
    (238
    )
    
    
    
    
    
    
    55
    
    
    
    1,032
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    794Dividends paid  $0.21
per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,479
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,479
    )Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (53
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53
    )Transfer of treasury
stock from rabbi trust
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (477
    )
    
    
    (8,946
    )
    
    
    477
    
    
    
    8,946
    
    
    
    
    
    
    
    
    
    
    
    Balance May 29, 2004
    
    
    81,579
    
    
    
    816
    
    
    
    586,616
    
    
    
    364,886
    
    
    
    (36,198
    )
    
    
    (679,016
    )
    
    
    
    
    
    
    
    
    
    
    (6,982
    )
    
    
    (4,612
    )
    
    
    261,708Comprehensive loss (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (379,280
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,923
    )
    
    
    (382,203
    )Restricted share award
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    
    
    
    
    20
    
    
    
    375
    
    
    
    
    
    
    
    
    
    
    
    (221
    )
    
    
    
    
    
    
    (1
    )Deferred share award
    
    
    
    
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    51
    
    
    
    965
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,372Restricted share
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,978
    
    
    
    
    
    
    
    2,978Restricted share
forfeitures and other
    
    
    
    
    
    
    
    
    
    
    (779
    )
    
    
    
    
    
    
    (87
    )
    
    
    (511
    )
    
    
    
    
    
    
    
    
    
    
    704
    
    
    
    
    
    
    
    (586
    )Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28
    )
    
    
    (192
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (192
    )Balance May 28, 2005
    
    
    81,579
    
    
    $
    816
    
    
    $
    586,089
    
    
    $
    (14,394
    )
    
    
    (36,242
    )
    
    $
    (678,379
    )
    
    
    
    
    
    $
    
    
    
    $
    (3,521
    )
    
    $
    (7,535
    )
    
    $
    (116,924
    )
 
 (a)
    
    See Note 22. Comprehensive Income (Loss) to these consolidated financial statements for
the reconciliations of net income (loss) to comprehensive income (loss).  57




---



##### Table of Contents



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 1. Voluntary Chapter 11 Filing
    
    
    authorize us to pay pre-petition and post-petition employee wages and salaries and
related benefits during our restructuring under Chapter 11;
    
    authorize us to pay trust fund taxes in the ordinary course of business, including
pre-petition amounts; and
    
    authorize the continued use of our cash management systems.
   58




---



##### Table of Contents



Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
 59




---



##### Table of Contents



2. Description of Business and Significant Accounting Policies
 Description of business
 Fiscal year end
 Principles of consolidation
 Use of
estimates
 Cash and cash equivalents
 Inventories
  May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)Ingredients and packaging
    
    $
    47,617
    
    
    $
    48,936Finished goods
    
    
    21,814
    
    
    
    22,965$
    69,431
    
    
    $
    71,901
 Property and equipment
 Assets held for sale -
 Lease obligations -
 60




---



##### Table of Contents



Accounting for Leases
 Software costs
  Goodwill and other intangible assets
   Impairment of long-lived assets
 Environmental liabilities
 61




---



##### Table of Contents



Liabilities subject to compromise.
 Pension obligations
  Reserves for self-insurance and postretirement benefits
 Derivative instruments Accounting for Derivative Instruments and Hedging Activities
  Other comprehensive income (loss)
 62




---



##### Table of Contents



Revenue recognition
 Cost of products sold 
 Advertising and promotion costs
 Sales incentives
 Consideration given to a customer
 Shipping and handling costs
 Restructuring charges Accounting for Costs Associated with Exit or Disposal Activities Accounting
for Contingencies
  Reorganization charges.
 Income taxes
 63




---



##### Table of Contents



Stock-based compensation Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation Accounting for Stock-Based Compensation  Transition and Disclosure
  2004
    
    2003Expected dividend yield
    
    
    2.0
    %
    
    
    2.2
    %Expected volatility
    
    
    46.4
    %
    
    
    43.8
    %Risk-free interest rate
    
    
    2.4
    %
    
    
    2.9
    %Expected term in years
    
    
    4.0
    
    
    
    4.0
  Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(dollars in thousands, except per share data)Net income (loss), as reported
    
    $
    (379,280
    )
    
    $
    (33,370
    )
    
    $
    18,727Add: Stock-based employee
compensation expense included in
reported net income, net of related
tax effects
    
    
    2,670
    
    
    
    1,341
    
    
    
    2,860Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects
    
    
    (4,157
    )
    
    
    (6,415
    )
    
    
    (10,791
    )Pro forma net income (loss)
    
    $
    (380,767
    )
    
    $
    (38,444
    )
    
    $
    10,796Basic earnings (loss) per share:As reported
    
    $
    (8.43
    )
    
    $
    (0.74
    )
    
    $
    0.42Pro forma
    
    
    (8.46
    )
    
    
    (0.86
    )
    
    
    0.24Diluted earnings (loss) per share:As reported
    
    
    (8.43
    )
    
    
    (0.74
    )
    
    
    0.41Pro forma
    
    
    (8.46
    )
    
    
    (0.86
    )
    
    
    0.24
  64




---



##### Table of Contents



Earnings per share
 Related party transactions
   Contingencies Accounting for Contingencies
 Newly Adopted Accounting Pronouncements , Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction and Qualified Production Activities Provided by
the American Jobs Creation Act of 2004 (
 Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003
 Employers Disclosures about Pensions and Other
Postretirement Benefits  an amendment of FASB Statements No. 87, 88, and 106
 65




---



##### Table of Contents



Recently Issued Accounting Pronouncements Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Accounting for Rental Costs Incurred during a
Construction Period
 Accounting Changes and Error Corrections Accounting Changes Reporting Accounting Changes
in Interim Financial Statements
 Accounting for Conditional Asset Retirement Obligations
 an interpretation of FASB Statement No. 143
 Share-Based Payment Accounting for Stock Issued to Employees
 Exchanges of Nonmonetary Assets  An Amendment of
APB Opinion No. 29
 66




---



##### Table of Contents



Inventory Costs  An Amendment of ARB No. 43,
Chapter 4 .
 
 3. Property and Equipment
  May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)Land and buildings
    
    $
    440,164
    
    
    $
    462,668Machinery and equipment
    
    
    1,023,527
    
    
    
    1,088,9851,463,691
    
    
    
    1,551,653Less accumulated depreciation
    
    
    (758,318
    )
    
    
    (738,728
    )$
    705,373
    
    
    $
    812,925
   
 4. Assets Held for Sale
  67




---



##### Table of Contents



5. Lease Obligations
  Fiscal Years Ending
    
    Capital Leases
    
    
    Operating Leases(dollars in thousands)2006
    
    $
    5,797
    
    
    $
    42,0972007
    
    
    3,414
    
    
    
    27,8422008
    
    
    1,981
    
    
    
    16,0362009
    
    
    1,378
    
    
    
    8,7652010
    
    
    1,106
    
    
    
    4,162Thereafter
    
    
    2,083
    
    
    
    6,366Total minimum lease payments
    
    
    15,759
    
    
    $
    105,268Amounts representing interest
    
    
    (4,245
    )Present value of minimum lease payments
    
    
    11,514Less: Capital lease obligations, short-term
    
    
    (5,797
    )Reclassified to liabilities subject to compromise
    
    
    (5,717
    )Capital lease obligations, long-term
    
    $
    
  Guarantors Accounting
and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others
   68




---



##### Table of Contents



6. Goodwill and Other Intangible Assets
    May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)GoodwillGross carrying amount
    
    $
    215,346
    
    
    $
    215,346Impairment charge
    
    
    (215,346
    )
    
    
    Net carrying amount
    
    $
    
    
    
    $
    215,346Intangible assets with indefinite lives(generally trademarks and trade names)Gross carrying amount
    
    $
    180,662
    
    
    $
    180,662Impairment charge
    
    
    (23,191
    )
    
    
    Net carrying amount
    
    $
    157,471
    
    
    $
    180,662Intangible assets with finite livesGross carrying amount
    
    $
    19,484
    
    
    $
    19,484Less:Accumulated amortization
    
    
    (11,040
    )
    
    
    (9,730
    )Impairment charge
    
    
    (3,872
    )
    
    
    Net carrying amount
    
    $
    4,572
    
    
    $
    9,754
  69




---



##### Table of Contents



Fifty-Two Weeks EndedMay 28, 2005(dollars in thousands)Intangible assets with indefinite lives impairment
    
    $
    23,191Intangible assets with finite lives impairment
    
    
    3,872Total impairment
    
    
    27,063Restructuring charges (A)
    
    
    (12,866
    )Other intangible assets impairment
    
    $
    14,197
 
 (A)
    
    See Note 15. Restructuring and Other Charges to these consolidated financial
statements for more information.  70




---



##### Table of Contents



7. Debt
  May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)Secured:Post-petition credit agreement
    
    $
    
    
    
    $
    Senior secured credit facility  pre-petition
    
    
    476,402
    
    
    
    537,626Unsecured:6% senior subordinated convertible notes  pre-petition
    
    
    100,000
    
    
    
    Capital leases  pre-petition
    
    
    11,514
    
    
    
    15,437587,916
    
    
    
    553,063Less:Current portion
    
    
    (482,199
    )
    
    
    (542,701
    )Pre-filing date claims included in liabilities subject to compromise
    
    
    (105,717
    )
    
    
    Long-term debt
    
    $
    
    
    
    $
    10,362
 Post-Petition Credit Agreement
    71




---



##### Table of Contents



Senior Secured Credit Facility
    6% Senior Subordinated Convertible Notes
  72




---



##### Table of Contents



Debtors Accounting for a Modification or
Exchange of Debt Instruments
 
 8. Accrued Expenses and Other Liabilities
  May 28,
    
    May 29,2005
    
    2004(dollars in thousands)Self-insurance reserves
    
    $
    91,170
    
    
    $
    92,949Payroll, vacation and other compensation
    
    
    73,267
    
    
    
    80,880Pension and welfare
    
    
    27,396
    
    
    
    36,420Taxes other than income
    
    
    30,262
    
    
    
    25,519
 73




---



##### Table of Contents



May 28,
    
    May 29,2005
    
    2004(dollars in thousands)Accumulated postretirement benefit obligation
    
    $
    94,522
    
    
    $
    98,373Self-insurance reserves
    
    
    118,758
    
    
    
    101,920
 
 9. Derivative Instruments
         74




---



##### Table of Contents



10. Liabilities Subject to Compromise
     May 28, 2005(dollars in thousands)Accounts payable
    
    $
    129,294Taxes payable
    
    
    10,264Retirement obligations (SERP and deferred compensation)
    
    
    13,821Legal reserve
    
    
    12,931Interest bearing debt and capital leases
    
    
    105,717Other
    
    
    10,202$
    282,229
 
 75




---



##### Table of Contents



11. Employee Benefit Plans
 American Bakers Association Retirement Plan
       76




---



##### Table of Contents



Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Service cost
    
    $
    2,051
    
    
    $
    2,512
    
    
    $
    2,152Interest cost
    
    
    3,252
    
    
    
    2,870
    
    
    
    2,739Expected return on negative plan assets
    
    
    398
    
    
    
    257
    
    
    
    159Recognition ofPrior service cost
    
    
    423
    
    
    
    1,358
    
    
    
    757Actuarial (gain) loss
    
    
    7,708
    
    
    
    (1,061
    )
    
    
    8,546Total periodic pension cost
    
    
    13,832
    
    
    
    5,936
    
    
    
    14,353Curtailment gain included in restructuring charges
(See Note 15. Restructuring Charges)
    
    
    (2,641
    )
    
    
    
    
    
    
    Net pension expense
    
    $
    11,191
    
    
    $
    5,936
    
    
    $
    14,353
  May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)Benefit obligation at beginning of year
    
    $
    51,463
    
    
    $
    49,118Service cost
    
    
    2,051
    
    
    
    2,512Interest cost
    
    
    3,252
    
    
    
    2,870Benefit and expense payments
    
    
    (3,308
    )
    
    
    (3,225
    )Plan amendment
    
    
    423
    
    
    
    1,358Actuarial (gain) loss
    
    
    8,566
    
    
    
    (1,170
    )Curtailment gain
    
    
    (2,641
    )
    
    
    Benefit obligation at end of year
    
    
    59,806
    
    
    
    51,463Fair value of plan assets at beginning of year
    
    
    (4,289
    )
    
    
    (2,253
    )Employer contributions
    
    
    4,694
    
    
    
    1,554Benefits and expense payments
    
    
    (3,308
    )
    
    
    (3,225
    )Actual return on plan assets
    
    
    459
    
    
    
    (365
    )Fair value of plan assets at end of year
    
    
    (2,444
    )
    
    
    (4,289
    )Net benefit obligation liability at end of year
    
    $
    62,250
    
    
    $
    55,752Weighted average actuarial assumptions (using a measurement date of May 31):Discount rate
    
    
    5.5
    %
    
    
    6.5
    %Expected return on plan assets
    
    
    7.5
    %
    
    
    7.5
    %
    77




---



##### Table of Contents



Fiscal Years Ending
    
    (dollars in thousands)Benefit payments2006
    
    $
    3,3112007
    
    
    3,3382008
    
    
    3,4102009
    
    
    3,4862010
    
    
    3,5892011-2015
    
    
    19,556
 Defined Benefit Pension Plan
  Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Service cost
    
    $
    673
    
    
    $
    704
    
    
    $
    653Interest cost
    
    
    3,728
    
    
    
    3,715
    
    
    
    3,794Expected return on plan assets
    
    
    (4,347
    )
    
    
    (3,354
    )
    
    
    (4,434
    )Recognition ofPrior service cost
    
    
    173
    
    
    
    177
    
    
    
    (9
    )Actuarial loss
    
    
    200
    
    
    
    1,441
    
    
    
    Net pension expense
    
    $
    427
    
    
    $
    2,683
    
    
    $
    4
  78




---



##### Table of Contents



May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)Benefit obligation at beginning of year
    
    $
    63,520
    
    
    $
    63,237Service cost
    
    
    673
    
    
    
    704Interest cost
    
    
    3,728
    
    
    
    3,715Amendments
    
    
    998
    
    
    
    Actuarial loss
    
    
    4,560
    
    
    
    466Employee contributions
    
    
    58
    
    
    
    67Benefits and expenses paid
    
    
    (4,815
    )
    
    
    (4,669
    )Benefit obligation at end of year
    
    
    68,722
    
    
    
    63,520Fair value of plan assets at beginning of year
    
    
    54,473
    
    
    
    43,648Actual return on plan assets
    
    
    5,256
    
    
    
    13,998Employer contributions
    
    
    4,202
    
    
    
    1,429Employee contributions
    
    
    58
    
    
    
    67Benefits and expenses paid
    
    
    (4,815
    )
    
    
    (4,669
    )Fair value of plan assets at end of year
    
    
    59,174
    
    
    
    54,473Plan assets less than benefit obligation
    
    
    9,548
    
    
    
    9,047Unrecognized prior service cost
    
    
    (2,275
    )
    
    
    (1,450
    )Unrecognized net loss
    
    
    (11,680
    )
    
    
    (8,229
    )Additional minimum pension liability
    
    
    13,086
    
    
    
    8,123Net benefit obligation liability at end of year
    
    $
    8,679
    
    
    $
    7,491Intangible asset at end of year
    
    $
    2,275
    
    
    $
    1,450Weighted average actuarial assumptions (using a measurement date of March 31):Discount rate
    
    
    6.0
    %
    
    
    6.0
    %Expected return on plan assets
    
    
    8.5
    %
    
    
    8.0
    %Rate of compensation increase
    
    
    4.5
    %
    
    
    4.5
    %
     Fiscal Years Ending
    
    (dollars in thousands)Employer contributions2006
    
    $
    1,283Benefit payments2006
    
    $
    4,2712007
    
    
    4,2992008
    
    
    4,3802009
    
    
    4,4682010
    
    
    4,5522011-2015
    
    
    24,678
 79




---



##### Table of Contents



Postretirement Health and Life Plans
     Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Service cost
    
    $
    2,773
    
    
    $
    4,988
    
    
    $
    4,854Interest cost
    
    
    4,840
    
    
    
    8,330
    
    
    
    12,982Amortization:Unrecognized prior service benefit
    
    
    (6,644
    )
    
    
    (3,473
    )
    
    
    (945
    )Unrecognized net loss
    
    
    1,619
    
    
    
    4,386
    
    
    
    4,926Total postretirement benefit expense
    
    
    2,588
    
    
    
    14,231
    
    
    
    21,817Curtailment gain included in restructuring charges
(See Note 15. Restructuring Charges)
    
    
    (4,272
    )
    
    
    
    
    
    
    Net postretirement benefit expense
    
    $
    (1,684
    )
    
    $
    14,231
    
    
    $
    21,817
 80




---



##### Table of Contents



May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)APBO at beginning of year
    
    $
    76,367
    
    
    $
    202,221Service cost
    
    
    2,773
    
    
    
    4,988Interest cost
    
    
    4,840
    
    
    
    8,330Participant contributions
    
    
    5,071
    
    
    
    3,620Plan amendment
    
    
    (9,152
    )
    
    
    (72,268
    )Plan curtailment
    
    
    (2,870
    )
    
    
    Prior service cost
    
    
    
    
    
    
    16,579Actuarial gain
    
    
    (1,495
    )
    
    
    (72,345
    )Benefits paid
    
    
    (12,321
    )
    
    
    (14,758
    )APBO at end of year
    
    
    63,213
    
    
    
    76,367Unrecognized prior service benefit
    
    
    63,264
    
    
    
    64,552Unrecognized net loss
    
    
    (25,937
    )
    
    
    (31,446
    )Accrued postretirement benefit
    
    
    100,540
    
    
    
    109,473Less current portion in accrued expenses
    
    
    (6,018
    )
    
    
    (11,100
    )APBO included in other liabilities
    
    $
    94,522
    
    
    $
    98,373
   Fiscal Years Ending
    
    (dollars in thousands)Employer contributions
(reduced by expected participant contributions)2006
    
    $
    6,018Benefit payments (exclusive of participant contributions)2006
    
    $
    8,0202007
    
    
    7,4802008
    
    
    6,9662009
    
    
    6,5572010
    
    
    6,2082011-2015
    
    
    29,886
 Employee Stock Purchase Plan
  81




---



##### Table of Contents



Defined Contribution Retirement Plan
  Negotiated Multi-Employer Pension Plans
   Multi-Employer Postretirement Health Care Benefit Plans
  82




---



##### Table of Contents



12. Supplemental Executive Retirement Plan
    Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Service cost
    
    $
    462
    
    
    $
    1,066
    
    
    $
    834Interest cost
    
    
    1,494
    
    
    
    1,508
    
    
    
    1,396Recognition ofPrior service cost
    
    
    1,259
    
    
    
    2,729
    
    
    
    2,729Actuarial loss
    
    
    58
    
    
    
    103
    
    
    
    Net periodic pension cost
    
    
    3,273
    
    
    
    5,406
    
    
    
    4,959Net curtailment loss related to plan suspension
    
    
    10,341
    
    
    
    
    
    
    
    Total SERP expense
    
    $
    13,614
    
    
    $
    5,406
    
    
    $
    4,959
  May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)SERP obligation at beginning of year
    
    $
    26,928
    
    
    $
    24,258Service cost
    
    
    462
    
    
    
    1,066Interest cost
    
    
    1,494
    
    
    
    1,508Plan amendment
    
    
    (3,511
    )
    
    
    Actuarial (gain) loss
    
    
    (2,619
    )
    
    
    538Benefits paid
    
    
    (181
    )
    
    
    (442
    )SERP obligation at end of year
    
    
    22,573
    
    
    
    26,928Fair value of SERP assets at beginning of year
    
    
    
    
    
    
    Employer contributions
    
    
    181
    
    
    
    442Benefits paid
    
    
    (181
    )
    
    
    (442
    )Fair value of SERP assets at end of year
    
    
    
    
    
    
    Unfunded status
    
    
    22,573
    
    
    
    26,928Unrecognized prior service cost
    
    
    
    
    
    
    (13,644
    )Unrecognized net actuarial gain (loss)
    
    
    561
    
    
    
    (3,583
    )Additional minimum liability
    
    
    
    
    
    
    13,865Total SERP liability
    
    
    23,134
    
    
    
    23,566SERP liability classified as liabilities subject to compromise
    
    
    (9,918
    )
    
    
    Net SERP liability included in other liabilities
    
    $
    13,216
    
    
    $
    23,566Intangible asset included in other long-term assets
    
    $
    
    
    
    $
    13,644Weighted average actuarial assumptions (using a measurement date of March 31):Discount rate
    
    
    6.0
    %
    
    
    6.0
    %Rate of compensation increase
    
    
    
    
    
    
    4.0
    %
 83




---



##### Table of Contents



13. Key Employee Retention Plan
   
 14. Stock-Based Compensation
   84




---



##### Table of Contents



WeightedAverageShares
    
    
    Exercise PriceUnder Option
    
    
    Per Share(in thousands)Balance June 1, 2002
    
    
    7,172
    
    
    $
    22.93Issued
    
    
    3,610
    
    
    
    19.32Surrendered
    
    
    (559
    )
    
    
    24.15Exercised
    
    
    (639
    )
    
    
    16.11Balance May 31, 2003
    
    
    9,584
    
    
    
    21.96Issued
    
    
    20
    
    
    
    13.59Surrendered
    
    
    (4,477
    )
    
    
    29.26Exercised
    
    
    (55
    )
    
    
    14.09Balance May 29, 2004
    
    
    5,072
    
    
    
    15.57Options
reinstated due to rescinds
    
    
    312
    
    
    
    31.82Surrendered
    
    
    (866
    )
    
    
    16.90Exercised
    
    
    
    
    
    
    Balance May 28, 2005
    
    
    4,518
    
    
    
    16.43
  Weighted
    
    
    WeightedAverage
    
    
    AverageExercise
    
    
    RemainingShares
    
    
    Price
    
    
    ContractualRange of Exercise Prices Per Share
    
    Under Option
    
    
    Per Share
    
    
    Life In Years(in thousands)Outstanding:$
    
    8.63 -
    
    $
    
    
    10.00
    
    
    
    1,572
    
    
    $
    9.99
    
    
    
    7.710.63 -
    
    
    
    
    14.50
    
    
    
    1,323
    
    
    
    14.01
    
    
    
    5.314.75 -
    
    
    
    
    23.75
    
    
    
    995
    
    
    
    21.01
    
    
    
    3.124.19 -
    
    
    
    
    33.91
    
    
    
    628
    
    
    
    30.42
    
    
    
    3.7$
    
    8.63 -
    
    $
    
    
    33.91
    
    
    
    4,518
    
    
    
    16.43
    
    
    
    5.4Exercisable:$
    
    8.63 -

    
    $
   
    
    10.00
    
    
    
    1,165
    
    
    
    9.9910.63 -
    
    
    
    
    14.50
    
    
    
    1,319
    
    
    
    14.0114.75 -
    
    
    
    
    23.75
    
    
    
    988
    
    
    
    21.0424.19 -
    
    
    
    
    33.91
    
    
    
    609
    
    
    
    30.50$
    
    8.63 -
    
    $
    
    
    33.91
    
    
    
    4,081
    
    
    
    17.02
   85




---



##### Table of Contents



15. Restructuring Charges
  May 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Severance costs
    
    $
    12,754
    
    
    $
    3,617
    
    
    $
    3,658Long-lived asset charges (credits)
    
    
    43,745
    
    
    
    1,170
    
    
    
    2,200Curtailment gain on benefit plans (Mid-Atlantic PC)
    
    
    (6,913
    )
    
    
    
    
    
    
    Other exit costs
    
    
    4,707
    
    
    
    7,279
    
    
    
    4,052Total
    
    $
    54,293
    
    
    $
    12,066
    
    
    $
    9,910
 Fiscal 2005 Restructurings
   86




---



##### Table of Contents



87




---



##### Table of Contents



Fiscal 2004 Restructurings
     Fiscal 2003 Restructurings
    88




---



##### Table of Contents



Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)
    
    Other
    
    Total(dollars in thousands)Second Quarter 2003 PlanBalance June 1, 2002
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Expenses in Fiscal 2003
    
    
    1,450
    
    
    
    304
    
    
    
    1,355
    
    
    
    3,109Cash Paid in Fiscal 2003
    
    
    (1,411
    )
    
    
    
    
    
    
    (1,318
    )
    
    
    (2,729
    )Noncash Utilization in 2003
    
    
    
    
    
    
    (304
    )
    
    
    
    
    
    
    (304
    )Balance, May 31, 2003
    
    
    39
    
    
    
    
    
    
    
    37
    
    
    
    76Expensed in Fiscal 2004
    
    
    14
    
    
    
    (1,700
    )
    
    
    392
    
    
    
    (1,294
    )Cash Paid in Fiscal 2004
    
    
    (53
    )
    
    
    
    
    
    
    (429
    )
    
    
    (482
    )Noncash Utilization in 2004
    
    
    
    
    
    
    1,700
    
    
    
    
    
    
    
    1,700Balance May 29, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, May 28, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Third Quarter 2003 PlanBalance, June 1, 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2003
    
    
    2,208
    
    
    
    1,896
    
    
    
    2,697
    
    
    
    6,801Cash Paid in Fiscal 2003
    
    
    (1,042
    )
    
    
    
    
    
    
    (695
    )
    
    
    (1,737
    )Noncash Utilization in
Fiscal 2003
    
    
    
    
    
    
    (1,896
    )
    
    
    
    
    
    
    (1,896
    )Balance, May 31, 2003
    
    
    1,166
    
    
    
    
    
    
    
    2,002
    
    
    
    3,168Expensed in Fiscal 2004
    
    
    632
    
    
    
    746
    
    
    
    2,055
    
    
    
    3,433Cash Paid in Fiscal 2004
    
    
    (1,798
    )
    
    
    
    
    
    
    (2,763
    )
    
    
    (4,561
    )Noncash Utilization in 2004
    
    
    
    
    
    
    (746
    )
    
    
    
    
    
    
    (746
    )Balance May 29, 2004
    
    
    
    
    
    
    
    
    
    
    1,294
    
    
    
    1,294Expensed in Fiscal 2005
    
    
    
    
    
    
    262
    
    
    
    294
    
    
    
    556Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    (555
    )
    
    
    (555
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (262
    )
    
    
    (1,033
    )
    
    
    (1,295
    )Balance, May 28, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Second Quarter 2004 PlanBalance, May 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2004
    
    
    658
    
    
    
    517
    
    
    
    731
    
    
    
    1,906Cash Paid in Fiscal 2004
    
    
    (541
    )
    
    
    
    
    
    
    (731
    )
    
    
    (1,272
    )Noncash Utilization in 2004
    
    
    
    
    
    
    (517
    )
    
    
    
    
    
    
    (517
    )Balance May 29, 2004
    
    
    117
    
    
    
    
    
    
    
    
    
    
    
    117Expensed in Fiscal 2005
    
    
    (24
    )
    
    
    151
    
    
    
    1,035
    
    
    
    1,162Cash Paid in Fiscal 2005
    
    
    (82
    )
    
    
    
    
    
    
    (1,035
    )
    
    
    (1,117
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (151
    )
    
    
    
    
    
    
    (151
    )Balance, May 28, 2005
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Third Quarter 2004 PlanBalance, May 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2004
    
    
    
    
    
    
    1,200
    
    
    
    
    
    
    
    1,200
 89




---



##### Table of Contents



Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)
    
    Other
    
    Total(dollars in thousands)Cash Paid in Fiscal 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2004
    
    
    
    
    
    
    (1,200
    )
    
    
    
    
    
    
    (1,200
    )Balance May 29, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, May 28, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fourth Quarter 2004 PlanBalance, May 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2004
    
    
    2,313
    
    
    
    407
    
    
    
    4,101
    
    
    
    6,821Cash Paid in Fiscal 2004
    
    
    (1,070
    )
    
    
    
    
    
    
    (992
    )
    
    
    (2,062
    )Noncash Utilization in 2004
    
    
    
    
    
    
    (407
    )
    
    
    
    
    
    
    (407
    )Balance May 29, 2004
    
    
    1,243
    
    
    
    
    
    
    
    3,109
    
    
    
    4,352Expensed in Fiscal 2005
    
    
    (410
    )
    
    
    278
    
    
    
    1,232
    
    
    
    1,100Cash Paid in Fiscal 2005
    
    
    (789
    )
    
    
    
    
    
    
    (4,341
    )
    
    
    (5,130
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (278
    )
    
    
    
    
    
    
    (278
    )Balance, May 28, 2005
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    44Monroe, LA Bakery ClosingExpensed in Fiscal 2005
    
    
    216
    
    
    
    378
    
    
    
    357
    
    
    
    951Cash Paid in Fiscal 2005
    
    
    (146
    )
    
    
    
    
    
    
    (357
    )
    
    
    (503
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (378
    )
    
    
    
    
    
    
    (378
    )Balance, May 28, 2005
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    70Buffalo, NY Bakery Closing
& Outlet ClosingsExpensed in Fiscal 2005
    
    
    1,374
    
    
    
    2,937
    
    
    
    1,122
    
    
    
    5,433Cash Paid in Fiscal 2005
    
    
    (1,323
    )
    
    
    
    
    
    
    (966
    )
    
    
    (2,289
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (2,937
    )
    
    
    (156
    )
    
    
    (3,093
    )Balance, May 28, 2005
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    51Pacific NorthwestExpensed in Fiscal 2005
    
    
    677
    
    
    
    30
    
    
    
    557
    
    
    
    1,264Cash Paid in Fiscal 2005
    
    
    (561
    )
    
    
    
    
    
    
    (102
    )
    
    
    (663
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (30
    )
    
    
    (455
    )
    
    
    (485
    )Balance, May 28, 2005
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    116Florence, SC Bakery ClosingExpensed in Fiscal 2005
    
    
    1,664
    
    
    
    2,774
    
    
    
    109
    
    
    
    4,547Cash Paid in Fiscal 2005
    
    
    (1,571
    )
    
    
    
    
    
    
    (109
    )
    
    
    (1,680
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (2,774
    )
    
    
    
    
    
    
    (2,774
    )Balance, May 28, 2005
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    93Companywide
Reduction-in-ForceExpensed in Fiscal 2005
    
    
    1,644
    
    
    
    
    
    
    
    
    
    
    
    1,644Cash Paid in Fiscal 2005
    
    
    (1,178
    )
    
    
    
    
    
    
    
    
    
    
    (1,178
    )Noncash Utilization in 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, May 28, 2005
    
    
    466
    
    
    
    
    
    
    
    
    
    
    
    466Florida Profit CenterExpensed in Fiscal 2005
    
    
    2,193
    
    
    
    3,800
    
    
    
    1
    
    
    
    5,994Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (3,800
    )
    
    
    
    
    
    
    (3,800
    )Balance, May 28, 2005
    
    
    2,193
    
    
    
    
    
    
    
    
    
    
    
    2,193Mid-Atlantic Profit CenterExpensed in Fiscal 2005
    
    
    1,995
    
    
    
    8,485
    
    
    
    (6,913
    )
    
    
    3,567Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2005
    
    
    
    
    
    
    (8,485
    )
    
    
    6,913
    
    
    
    (1,572
    )Balance, May 28, 2005
    
    
    1,995
    
    
    
    
    
    
    
    
    
    
    
    1,995Northeast Profit CenterExpensed in Fiscal 2005
    
    
    3,425
    
    
    
    20,141
    
    
    
    
    
    
    
    23,566Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2005
    
    
    
    
    
    
    (20,141
    )
    
    
    
    
    
    
    (20,141
    )
 90




---



##### Table of Contents



Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)
    
    Other
    
    Total(dollars in thousands)Balance, May 28, 2005
    
    
    3,425
    
    
    
    
    
    
    
    
    
    
    
    3,425Software Write-OffExpensed in Fiscal 2005
    
    
    
    
    
    
    4,509
    
    
    
    
    
    
    
    4,509Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2005
    
    
    
    
    
    
    (4,509
    )
    
    
    
    
    
    
    (4,509
    )Balance, May 28, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ConsolidatedBalance June 1, 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expenses in Fiscal 2003
    
    
    3,658
    
    
    
    2,200
    
    
    
    4,052
    
    
    
    9,910Cash Paid in Fiscal 2003
    
    
    (2,453
    )
    
    
    
    
    
    
    (2,013
    )
    
    
    (4,466
    )Noncash Utilization in 2003
    
    
    
    
    
    
    (2,200
    )
    
    
    
    
    
    
    (2,200
    )Balance, May 31, 2003
    
    
    1,205
    
    
    
    
    
    
    
    2,039
    
    
    
    3,244Expensed in Fiscal 2004
    
    
    3,617
    
    
    
    1,170
    
    
    
    7,279
    
    
    
    12,066Cash Paid in Fiscal 2004
    
    
    (3,462
    )
    
    
    
    
    
    
    (4,915
    )
    
    
    (8,377
    )Noncash Utilization in 2004
    
    
    
    
    
    
    (1,170
    )
    
    
    
    
    
    
    (1,170
    )Balance, May 29, 2004
    
    
    1,360
    
    
    
    
    
    
    
    4,403
    
    
    
    5,763Expensed in Fiscal 2005
    
    
    12,754
    
    
    
    43,745
    
    
    
    (2,206
    )
    
    
    54,293Cash Paid in Fiscal 2005
    
    
    (5,650
    )
    
    
    
    
    
    
    (7,466
    )
    
    
    (13,116
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (43,745
    )
    
    
    5,269
    
    
    
    (38,476
    )Balance, May 28, 2005
    
    $
    8,464
    
    
    $
    
    
    
    $
    
    
    
    $
    8,464
   Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)
    
    Other
    
    TotalSecond Quarter 2003 Plan
    
    $
    1,464
    
    
    $
    (1,396
    )
    
    $
    1,747
    
    
    $
    1,815Third Quarter 2003 Plan
    
    
    2,840
    
    
    
    2,904
    
    
    
    5,046
    
    
    
    10,790Second Quarter 2004 Plan
    
    
    634
    
    
    
    668
    
    
    
    1,766
    
    
    
    3,068Third Quarter 2004 Plan
    
    
    
    
    
    
    1,200
    
    
    
    
    
    
    
    1,200Fourth Quarter 2004 Plan
    
    
    1,903
    
    
    
    685
    
    
    
    5,333
    
    
    
    7,921Monroe, LA Bakery Closing
    
    
    216
    
    
    
    378
    
    
    
    357
    
    
    
    951Buffalo, NY
Bakery Closing & Outlet Closings
    
    
    1,374
    
    
    
    2,937
    
    
    
    1,122
    
    
    
    5,433Pacific Northwest
    
    
    677
    
    
    
    30
    
    
    
    557
    
    
    
    1,264Florence,
SC Bakery Closing
    
    
    1,664
    
    
    
    2,774
    
    
    
    109
    
    
    
    4,547Companywide
Reduction-in-Force
    
    
    1,644
    
    
    
    
    
    
    
    
    
    
    
    1,644Florida Profit Center
    
    
    2,193
    
    
    
    3,800
    
    
    
    1
    
    
    
    5,994Mid-Atlantic Profit Center
    
    
    1,995
    
    
    
    8,485
    
    
    
    (6,913
    )
    
    
    3,567Northeast Profit Center
    
    
    3,425
    
    
    
    20,141
    
    
    
    
    
    
    
    23,566Software Write-Off
    
    
    
    
    
    
    4,509
    
    
    
    
    
    
    
    4,509
 91




---



##### Table of Contents



Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)(1)
    
    Other
    
    TotalThird Quarter 2003 Plan
    
    $
    
    
    
    $
    117
    
    
    $
    97
    
    
    $
    214Second Quarter 2004 Plan
    
    
    
    
    
    
    181
    
    
    
    28
    
    
    
    209Fourth Quarter 2004 Plan
    
    
    
    
    
    
    17
    
    
    
    (113
    )
    
    
    (96
    )Buffalo, NY Bakery
Closing & Outlet Closings
    
    
    
    
    
    
    68
    
    
    
    266
    
    
    
    334Florence, SC Bakery
Closing
    
    
    
    
    
    
    122
    
    
    
    319
    
    
    
    441Florida Profit Center
    
    
    
    
    
    
    
    
    
    
    794
    
    
    
    794Mid-Atlantic Profit Center
    
    
    (87
    )
    
    
    599
    
    
    
    653
    
    
    
    1,165Northeast Profit Center
    
    
    (320
    )
    
    
    1,774
    
    
    
    1,125
    
    
    
    2,579
 
 (1)
    
    Excludes gains realized on subsequent sales of real property. 
 16. Reorganization Charges
  Fifty-Two Weeks EndedMay 28, 2005Reorganization
    
    
    CashCharges
    
    
    Payments(dollars in thousands)Professional fees
    
    $
    33,184
    
    
    $
    27,269Employee retention expenses
    
    
    5,641
    
    
    
    1,934Lease rejection credits
    
    
    (427
    )
    
    
    (140
    )Interest income
    
    
    (537
    )
    
    
    (537
    )Gain on sale of assets
    
    
    (1,655
    )
    
    
    (1,655
    )Write-off of debt fees
    
    
    3,000
    
    
    
    Reorganization charges, net
    
    $
    39,206
    
    
    $
    26,871
 
 17. Income Taxes
  Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003Statutory federal tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income tax, net
    
    
    2.6
    
    
    
    1.8
    
    
    
    1.6Non-deductible goodwill impairment
    
    
    (15.8
    )
    
    
    
    
    
    
    Valuation allowance increase
    
    
    (14.7
    )
    
    
    
    
    
    
    Adjustments to prior year tax reserve and refundable credits
    
    
    2.0
    
    
    
    3.2
    
    
    
    Other
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    (0.9
    )8.8
    %
    
    
    39.9
    %
    
    
    35.7
    %
 92




---



##### Table of Contents



Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Current:Federal
    
    $
    (38,534
    )
    
    $
    (14,023
    )
    
    $
    20,954State
    
    
    (5,755
    )
    
    
    (2,809
    )
    
    
    2,220(44,289
    )
    
    
    (16,832
    )
    
    
    23,174Deferred:Federal
    
    
    6,953
    
    
    
    (4,785
    )
    
    
    (11,285
    )State
    
    
    797
    
    
    
    (551
    )
    
    
    (1,479
    )7,750
    
    
    
    (5,336
    )
    
    
    (12,764
    )$
    (36,539
    )
    
    $
    (22,168
    )
    
    $
    10,410
  May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)Deferred tax liabilities:Property and equipment
    
    $
    (143,426
    )
    
    $
    (151,510
    )Intangibles
    
    
    (41,849
    )
    
    
    (64,431
    )Other
    
    
    (6,190
    )
    
    
    (861
    )Gross deferred tax liabilities
    
    
    (191,465
    )
    
    
    (216,802
    )Deferred tax asset:Payroll and benefits accruals
    
    
    96,509
    
    
    
    87,012Self-insurance reserves
    
    
    78,503
    
    
    
    64,822Net operating loss carryforwards
    
    
    16,945
    
    
    
    Other
    
    
    4,997
    
    
    
    16,043Gross deferred tax assets
    
    
    196,954
    
    
    
    167,877Less: Valuation allowance
    
    
    (62,165
    )
    
    
    Net deferred tax asset
    
    
    134,789
    
    
    
    167,877Net deferred tax liability
    
    $
    (56,676
    )
    
    $
    (48,925
    )
 93




---



##### Table of Contents



May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)Other current assets
    
    $
    33,496
    
    
    $
    64,810Deferred income taxes (non-current)
    
    
    (90,172
    )
    
    
    (113,735
    )Net deferred tax liability
    
    $
    (56,676
    )
    
    $
    (48,925
    )
      
 18. Commitments and Contingencies
    94




---



##### Table of Contents



95




---



##### Table of Contents



96




---



##### Table of Contents



97




---



##### Table of Contents



98




---



##### Table of Contents



19. Stock Repurchases
  99




---



##### Table of Contents



20. Stockholder Rights Plan
    
 21. Earnings (Loss) per Share
 Earnings per
Share
  100




---



##### Table of Contents



Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(in thousands)Weighted average common shares outstanding:Basic
    
    
    45,010
    
    
    
    44,868
    
    
    
    44,599Effect of dilutive stock compensation
    
    
    
    
    
    
    
    
    
    
    586Diluted
    
    
    45,010
    
    
    
    44,868
    
    
    
    45,185
   
 22. Comprehensive Income (Loss)
  Fifty-Two Weeks EndedMay 28,
    
    
    May 29,
    
    
    May 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Net income (loss)
    
    $
    (379,280
    )
    
    $
    (33,370
    )
    
    $
    18,727Other comprehensive income (loss):Change in fair value of cash flow
hedges, net of income taxes of $0, $2,410, and $6,630, respectively
    
    
    (96
    )
    
    
    4,017
    
    
    
    (11,049
    )(Gains) losses on interest rate swaps
reclassified to interest expense, net
of income taxes of $0, $3,380, and
$5,383, respectively
    
    
    816
    
    
    
    5,634
    
    
    
    8,971Commodity derivative (gains) losses
reclassified to cost of products
sold, net of income taxes of $0,
$2,537, and $774, respectively
    
    
    275
    
    
    
    (4,229
    )
    
    
    1,290Minimum pension liability adjustment,
net of income taxes of $0, $4,316,
and $6,912, respectively
    
    
    (3,918
    )
    
    
    7,178
    
    
    
    (11,467
    )(2,923
    )
    
    
    12,600
    
    
    
    (12,255
    )Comprehensive income (loss)
    
    $
    (382,203
    )
    
    $
    (20,770
    )
    
    $
    6,472
 101




---



##### Table of Contents



May 28,
    
    
    May 29,2005
    
    
    2004(dollars in thousands)Derivative instruments
    
    $
    671
    
    
    $
    (324
    )Minimum pension liability adjustment
    
    
    (8,206
    )
    
    
    (4,288
    )Total
    
    $
    (7,535
    )
    
    $
    (4,612
    )
 
 23. Segment Information
 Disclosures about Segments of an Enterprise and Related Information
  Wholesale Operations
 Retail Operations
      102




---



##### Table of Contents



Fifty-Two Weeks EndedMay 28, 2005(dollars in thousands)Net SalesWholesale Operations
    
    $
    2,995,481Retail Operations
    
    
    408,024Total net sales
    
    $
    3,403,505Operating Income (Loss)Wholesale Operations
    
    $
    43,874Retail Operations
    
    
    7,26451,138Corporate
    
    
    (386,674
    )Total operating loss
    
    
    (335,536
    )Interest expense
    
    
    41,430Reorganization charges
    
    
    39,206Other income
    
    
    (353
    )80,283Loss before income taxes
    
    
    (415,819
    )Provision (benefit) for income taxes
    
    
    (36,539
    )Net loss
    
    $
    (379,280
    )
 
 24. Subsequent Events
    103




---



##### Table of Contents



104




---



##### Table of Contents



25. Quarterly Financial Information (Unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    Fourth(dollars in thousands, except per share data)2005Net sales
    
    $
    811,977
    
    
    $
    798,711
    
    
    $
    1,003,075
    
    
    $
    789,742Cost of products sold
    
    
    413,078
    
    
    
    412,883
    
    
    
    506,101
    
    
    
    391,992Operating loss
    
    
    (248,408
    )
    
    
    (17,978
    )
    
    
    (27,496
    )
    
    
    (41,654
    )Net loss
    
    
    (243,466
    )
    
    
    (34,011
    )
    
    
    (45,327
    )
    
    
    (56,476
    )Loss per share:Basic
    
    
    (5.42
    )
    
    
    (0.76
    )
    
    
    (1.01
    )
    
    
    (1.25
    )Diluted
    
    
    (5.42
    )
    
    
    (0.76
    )
    
    
    (1.01
    )
    
    
    (1.25
    )2004Net sales
    
    $
    831,015
    
    
    $
    813,798
    
    
    $
    1,019,711
    
    
    $
    803,038Cost of products sold
    
    
    407,305
    
    
    
    418,045
    
    
    
    505,571
    
    
    
    402,382Operating income (loss)
    
    
    25,674
    
    
    
    (31,201
    )
    
    
    (3,741
    )
    
    
    (9,058
    )Net income (loss)
    
    
    10,514
    
    
    
    (24,795
    )
    
    
    (7,486
    )
    
    
    (11,603
    )Earnings (loss) per share:Basic
    
    
    0.23
    
    
    
    (0.55
    )
    
    
    (0.17
    )
    
    
    (0.26
    )Diluted
    
    
    0.23
    
    
    
    (0.55
    )
    
    
    (0.17
    )
    
    
    (0.26
    )
   105




---



##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Control and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
  
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;
    
    provide reasonable assurance that the transactions are recorded as necessary to permit
the preparation of financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect on the
financial statements.
    106




---



##### Table of Contents




    
    implementation of a new financial data reporting system and related organizational
realignments at the beginning of the fiscal year;
    
    changes in management and other personnel during fiscal 2005;
    
    failure to prepare and plan for a timely completion of managements assessment,
including adding the necessary additional resources;
    
    diversion of resources to internal and external accounting and reporting
investigations, including investigations into our manner of establishing self-insurance
reserves and the proper accounting treatment for the ABA Plan; and
    
    our efforts during the Chapter 11 proceedings, including the associated additional
accounting and financial reporting requirements and the PC review and consolidation
process that resulted in significant bakery closings and route, depot and thrift store
consolidations, which required the time of personnel that would otherwise have been
available for the assessment process.
  Ineffective Control Environment
 
    
    historically, a company-wide attitude of control consciousness did not permeate
throughout the organization;
    
    due to ineffective corporate oversight and accountability, information was not
consistently communicated to the appropriate levels of the organization;
    
    there was not sufficient documentation and communication of our accounting policies and
procedures to ensure the proper and consistent application of GAAP throughout the
organization;
    
    there was a pervasive shortage of resources in key control areas such as finance and
accounting, benefits and information technology functions;
    
    our internal audit function was inadequately staffed to plan or perform routine
internal audits in addition to assisting with managements assessment of the effectiveness
of internal control over financial reporting;
    
    we did not have formal processes in place that covered self-assessments, independent
testing or reporting of the adequacy or effectiveness of our internal control procedures
over financial reporting;
    
    our planning, management and execution was inadequate to enable us to complete
managements assessment of the effectiveness of internal control over financial reporting
to comply with Section 404 of the Sabanes-Oxley Act of 2002 and conclude that we had
effective controls on a timely basis.
 Accounting for Pension Plan Obligations
 107




---



##### Table of Contents



Establishing Self-Insurance Reserves
 Accrued Compensated Absences Liabilities
 Lease Capitalization
 Property and Equipment
 Recording Purchases and Processing Expenditures
 Information Technology Access Controls
 Use of Third Party Specialists
 Third Party Service Providers
 Review and Approval of Contracts
 Recording Restructuring and Reorganization Expenses and Liabilities
  108




---



##### Table of Contents



Changes in Internal Control over Financial Reporting
  
    
    we have substantially completed the design, documentation, evaluation and communication
of standardized policies and procedures pertaining to all of the processes that are part
of our internal control over financial reporting;
    
    management has communicated its endorsement and reinforced its commitment to
maintaining sound and effective internal controls over financial reporting;
    
    formal self-assessments of substantially all of the companys internal controls over
financial reporting have been completed throughout the organization and results have been
summarized and reported to management;
    
    the Companys internal audit department has substantially completed testing of the
effectiveness of defined internal controls over financial reporting at all levels of the
organization;
    
    we have hired or otherwise obtained the necessary audit resources to enable the
internal audit department to fulfill its responsibilities and report to management and the
Audit Committee of the Board of Directors on the results of its work;
    
    additional personnel have been hired and service providers have been engaged on a
temporary basis to address shortfalls in staffing and assist us with accounting, finance,
internal audit and information technology responsibilities;
    
    pension accounting has been reviewed for all plans to ensure the accounting and
valuation of our obligations are correct. In addition, we have added controls to monitor
activity and changes to
 109




---



##### Table of Contents



individual plan provisions to ensure that they are approved and appropriately reflected
in our financial statements;
    
    we have made substantial progress in establishing adequate controls related to employee
accrued compensated absences liabilities;
    
    procedures have been documented, centralized controls have been added and a formal
policy document relating to the accounting for plant and equipment has been substantially
completed;
    
    our controls over the recording of purchases and the processing of expenditures have
been improved through the documentation and communication of formalized procedures and
the hiring of experienced personnel and management;
    
    policies have been issued and controls have been added or are in the process of being
added to appropriately restrict and monitor access to information technology programs and
systems;
    
    we have established improved controls over the completeness and accuracy of data
provided to third party specialists;
    
    third party service providers have been identified and we are in the process of
evaluating the significance of their individual impact on our financial statements and the
extent of the evaluation of their controls that will be required; and
    
    contracting authority for the review and approval of new contracts and other
commitments has been defined, communicated and redistributed and a database is being
maintained and distributed to improve appropriate communication, accounting and
disclosure.
  110




---



##### Table of Contents



Ineffective
Control Environment:
 
    
    a Company-wide attitude of control consciousness did not permeate throughout the
organization;
    
    due to ineffective corporate oversight and accountability, information was not
consistently communicated to the appropriate levels of the organization;
    
    there was not sufficient documentation and communication of the Companys accounting
policies and procedures to ensure the proper and consistent application of generally
accepted accounting principles throughout the organization;
    
    there was a pervasive shortage of resources in key control areas such as finance and
accounting, benefits and information technology functions;
 111




---



##### Table of Contents




    
    the Companys internal audit function was inadequately staffed to plan or perform
routine internal audits in addition to assisting with managements assessment of the
effectiveness of internal control over financial reporting;
    
    the Company did not have formal processes in place that covered self-assessments,
independent testing or reporting of the adequacy or effectiveness of its internal control
procedures over financial reporting;
    
    the Companys planning, management and execution was inadequate to enable management
to complete its assessment of the effectiveness of internal control over financial
reporting to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and conclude that
they had effective controls on a timely basis.
 Accounting
for Pension Plan Obligations:
 Establishing
Self-Insurance Reserves:
 Accrued
Compensated Absences Liabilities:
 Lease
Capitalization:
 Property
and Equipment:
 Recording
Purchases and Processing Expenditures:
 112




---



##### Table of Contents



Information
Technology Access Controls:
 Use of
Third Party Specialists:
 Third
Party Service Providers:
 Review
and Approval of Contracts:
 Recording
Restructuring and Reorganization Expenses and Liabilities:
  113




---



##### Table of Contents



114




---



##### Table of Contents



ITEM 9B. OTHER INFORMATION
  115




---



##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 Board of Directors
  DirectorName
    
    Age
    
    Since
    

Principal Occupation or Employment for the Last Five Years and DirectorshipsMichael J. Anderson
1,3,4
    
    
    55
    
    
    
    1998
    
    
    President and Chief Executive Officer of The Andersons,
Inc., a diversified agribusiness and retailing company,
since September 1990. Mr. Anderson is a director of
The Andersons, Inc. and Fifth Third
BancCorp of
Northwest Ohio.Robert B. Calhoun
2,3
    
    
    63
    
    
    
    1991
    
    
    Managing Director
of Monitor Clipper
Partners, a private
equity investment
firm, since August
1997. Mr. Calhoun
is a director of
Avondale Mills,
Inc. and The Lord
Abbett Family of
Funds.Frank E. Hortonl,2
    
    
    67
    
    
    
    1992
    
    
    Principal
Associate, Horton &
Associates,
Consultants in
Higher Education,
Bayfield, Colorado,
since 1999;
Executive
Consultant to the
Provost, University
of Missouri 
Kansas City, July
2003 to June 2004;
Interim Dean of
Biological
Sciences,
University of
Missouri  Kansas
City, August 2002
to February 2003;
Interim President,
Southern Illinois
University,
February 2000 to
October 2000.G. Kenneth Baum 3
    
    
    76
    
    
    
    1988
    
    
    Chairman of the
Board of George K.
Baum Group, Inc.,
an investment company, since April
1994. Mr. Baum is a
director of H & R
Block, Inc.Ronald L. Thompson
1,4
    
    
    57
    
    
    
    2003
    
    
    Retired October
2005; Chairman of
the Board and Chief
Executive Officer
of Midwest Stamping
Company, a
manufacturer of
stamped metal
components and
assemblies for the
automotive
industry, March
1993 to October
2005. Mr. Thompson
is a Trustee of the
Teachers Insurance
and Annuity
Association.Leo Benatar 4
    
    
    76
    
    
    
    1991
    
    
    Chairman of the
Board of IBC;
Principal for
Benatar &
Associates, a
consulting firm,
since July 1996.
Mr. Benatar is a
director of Mohawk
Industries, Inc.,
PAXAR Corporation
and Aaron Rents,
Inc.Richard L. Metrick
2,4
    
    
    65
    
    
    
    2000
    
    
    Senior Managing
Director in the
Investment Banking
Department of Bear
Stearns & Co., Inc.
since February
1989.David N. Weinstein
    
    
    47
    
    
    
    2006
    
    
    Chairman of the
Board of Pioneer
Companies, Inc.,
January 2002 to
December 2005;
Chairman of the
Board of York
Research
Corporation,
November 2002 to
June 2004; Managing
Director and Head
of High Yield
Origination and
Capital Markets of
BNP Paribas, March
2000 to February
2002.William P. Mistretta
    
    
    50
    
    
    
    2006
    
    
    Vice President of
Operations for a
division of Compass
Group PLCs U.S.
operations since
March 2006.
 
 1
    
    Member of the Audit Committee2
    
    Member of the Compensation Committee3
    
    Member of the Nominating/Corporate Governance Committee4
    
    Member of the Executive Committee  116




---



##### Table of Contents



Audit Committee
 www.interstatebakeriescorp.com
 Executive Officers
  Name
    
    Age
    

Present Principal Occupation or Employment and Five-Year Employment HistoryAntonio C. Alvarez II 1
    
    
    58
    
    
    Chief Executive Officer of IBC since September 2004; and Managing
Director of Alvarez & Marsal LLC, a professional services firm,
since September 1983.James R. Elsesser2
    
    
    62
    
    
    Chief Executive Officer of IBC from October 2002 to September
2004; Financial Consultant from March 2002 through September
2002; and Vice President and Chief Financial Officer of Ralston
Purina Company for more than two years prior thereto.Michael D. Kafoure
    
    
    57
    
    
    President and Chief Operating
Officer of IBC since September 1995.John K. Suckow 1
    
    
    47
    
    
    Executive Vice President and Chief Restructuring Officer of IBC
since September 2004; Managing Director of Alvarez & Marsal LLC,
a professional services firm, since July 2002; and Partner at
Arthur Andersen LLP, a public accounting firm, from September
1992 to June 2002.Thomas S.
Bartoszewski3
    
    
    63
    
    
    Executive Vice President  Wholesale Business Unit, Eastern
Region of IBC from October 2003 to January 2005; Executive Vice
President  Eastern Division of IBC from August 2002 to October
2003; and Senior Vice President of the North Central Region of
IBC from May 1999 to August 2002.Ronald B. Hutchison
    
    
    56
    
    
    Executive Vice President and Chief Financial Officer of IBC since
July 2004; Executive Vice President of Aurora Foods, a branded
food manufacturing company, from June 2003 to March 2004;
Executive Vice President of Kmart Corporation, an operator of
consumer retail stores, from January 2002 to May 2003; and
Executive Vice President and Chief Financial Officer of Advantica
Restaurant Group, Inc., parent company of the Dennys Corporation
restaurant chain from January 1998 to November 2001.Kent B. Magill
    
    
    53
    
    
    Executive Vice President, General Counsel and Corporate Secretary
of IBC since August 2005; Vice President, General Counsel and
Corporate Secretary of IBC from June 2002 to August 2005; and
Associate General Counsel of
 117




---



##### Table of Contents



Name
    
    Age
    

Present Principal Occupation or Employment and Five-Year Employment HistoryIBC from November 2000 to June 2002.Robert P. Morgan
    
    
    50
    
    
    Executive Vice President  Wholesale Business Unit, Upper Midwest
and Northeast PCs of IBC since October 2005; Executive Vice
President  Sales and Trade Marketing Strategy from October 2003
to October 2005; Executive Vice President  Eastern
Division from February 2000 to August 2002; Executive Vice President  Central Division from
April 1999 to October 2003.Steven V. Proscino
    
    
    51
    
    
    Executive Vice President  Wholesale Business Unit, Southeast,
Mid-Atlantic and Florida PCs of IBC since October 2005; Executive
Vice President  Wholesale Business Unit, Eastern Region of IBC
from January 2005 to October 2005; Partner at Q6, LLC, a company
specializing in the design and implementation of performance
improvement programs for Fortune 500 companies, from January 2003
to January 2005; and Executive Vice President of Earthgrains/Sara
Lee Corporation, a company engaged in the manufacture and
distribution of wholesale baked goods, from January 1994 to
January 2003.Jacques Roizen 1,4
    
    
    37
    
    
    Chief Marketing Officer of IBC from November 2004 to August 2005;
Director of Alvarez & Marsal, a professional services firm, from
March 2003 until present; Consultant with McKinsey & Companys
Retail and Consumer Goods Consulting Practice from October 2000
until March 2003; Director of Business Development at Online
Retail Partners, an e-commerce venture capital and management
firm, from June 2000 until October 2000; and attended Columbia
Business School from August 1998 until graduation in May 2000.Richard C. Seban
    
    
    54
    
    
    Executive Vice President and Chief Marketing Officer of IBC since
August 2005; President and Chief Operating Officer of High Liner
Foods, Inc., a Nova Scotia based processor and marketer of frozen
seafood and pasta products, from July 2000 to March 2005.Richard D. Willson
    
    
    58
    
    
    Executive Vice President 
Wholesale Business Unit, Western Region
of IBC since June 2004; and Executive Vice President of the
Western Division of IBC from June 1999 through May 2004.J. Randall Vance
    
    
    46
    
    
    Senior Vice President  Finance and Treasurer of IBC since
September 2004; Vice President and Treasurer of Farmland
Industries, Inc. a diversified agribusiness cooperative, from
July 2002 to January 2004; Assistant Treasurer of Farmland
Industries, Inc. from 2000 to July 2002; and Director, Corporate
Finance of Farmland Industries, Inc. for more than 2 years prior
thereto.Laura D. Robb
    
    
    48
    
    
    Vice President and Corporate Controller of IBC since July 2002
and Assistant Corporate Controller of IBC for a period of more
than 2 years prior thereto.Paul E. Yarick5
    
    
    67
    
    
    Senior Vice President  Finance and Treasurer of IBC from April
2003 to September 2004; and Vice President and Treasurer of IBC
for more than three years prior thereto.Melvin H. Ghearing
    
    
    57
    
    
    Vice President  Bakery Outlet Business Unit since June 2004 and
Vice President  Retail Operations from July 1995 through May,
2004.
 
 1
    
    Messrs. Alvarez, Roizen and Suckow, as employees of A&M, were designated as officers of
IBC pursuant to an amended and restated letter agreement dated as of September 21, 2004,
further amended and restated as of October 14, 2004 and amended on July 18, 2005 and
elected by the Board of Directors in September 2004, April 2005, and March 2006.2
    
    Mr. Elsesser resigned as Chief Executive Office of IBC on September 21, 2004.3
    
    Mr. Bartoszewski retired on January 7, 2005. 118




---



##### Table of Contents



4
    
    As Interim Chief Marketing Officer, Mr. Roizen stepped down from his position when Mr.
Seban was hired on August 1, 2005.5
    
    Mr. Yarick retired on September 10, 2004. Involvement in Prior Bankruptcy Proceedings and/or Restructurings
  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Business Conduct and Ethics
  
 ITEM 11. EXECUTIVE COMPENSATION
 Summary Compensation Table
  Long Term CompensationAnnual Compensation
    
    
    Awards
    
    
    PayoutsRestricted
    
    
    SecuritiesOther annual
    
    
    Stock
    
    
    Underlying
    
    
    LTIP
    
    
    All otherBonus
    
    
    Compensation
    
    
    award(s)
    
    
    Options/SA
    
    
    Payouts
    
    
    Compensation1Year
    
    
    Salary ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Rs (#)
    
    
    ($)
    
    
    ($)Name and principal position (a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)
    
    
    (i)James R. Elsesser 2
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman of the Board and CEO
    
    
    2005
    
    
    
    228,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,969
    4,52004
    
    
    
    716,634
    
    
    
    
    
    
    
    
    
    
    
    784,700
    3
    
    
    
    
    
    
    
    
    
    
    23,6272003
    
    
    
    468,461
    
    
    
    245,000
    
    
    
    
    
    
    
    
    
    
    
    340,000
    
    
    
    
    
    
    
    6,623
 119




---



##### Table of Contents



Long Term CompensationAnnual Compensation
    
    
    Awards
    
    
    PayoutsRestricted
    
    
    SecuritiesOther annual
    
    
    Stock
    
    
    Underlying
    
    
    LTIP
    
    
    All otherBonus
    
    
    Compensation
    
    
    award(s)
    
    
    Options/SA
    
    
    Payouts
    
    
    Compensation1Year
    
    
    Salary ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Rs (#)
    
    
    ($)
    
    
    ($)Name and principal position (a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)
    
    
    (i)Michael D. Kafoure
    
    
    2006
    
    
    
    496,313
    
    
    
    219,127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,151
    10President
and Chief Operating Officer
    
    
    2005
    
    
    
    486,948
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,687
    42004
    
    
    
    480,537
    
    
    
    
    
    
    
    
    
    
    
    399,578
    3
    
    
    
    
    
    
    
    
    
    
    22,7872003
    
    
    
    461,415
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    21,926Ronald B. Hutchison
    
    
    2006
    
    
    
    356,731
    
    
    
    157,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,564
    11EVP and CFO
    
    
    2005
    
    
    
    313,653
    
    
    
    
    
    
    
    
    
    
    
    221,000
    7
    
    
    
    
    
    
    
    
    
    
    54,715
    62004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Antonio C. Alvarez II 8
    
    
    2006
    
    
    
    1,800,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Executive Officer
    
    
    2005
    
    
    
    1,274,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    John K. Suckow 8
    
    
    2006
    
    
    
    1,482,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive VP and ChiefRestructuring Officer
    
    
    2005
    
    
    
    1,117,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jacques E. Roizen 8, 9
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive VP and ChiefMarketing Officer
    
    
    2005
    
    
    
    733,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 1
    
    All other compensation for the fiscal year ended May 28, 2005, includes our
Companys contributions in the amounts of $6,685 and $6,685, which accrued during such fiscal
year for the accounts of Messrs. Elsesser and Kafoure, respectively, under our Companys
Retirement Income Plan and the imputed income for term life insurance provided by our Company
for the benefit of Messrs. Elsesser and Hutchison in the amounts of $1,319 and $483,
respectively.2
    
    Mr. Elsesser became Chief Executive Officer on October 1, 2002 and resigned September 21,
2004.3
    
    On January 23, 2004, the Company exchanged outstanding options to purchase shares of our
Common Stock with exercise prices of $25.00 or greater held by certain eligible employees for
shares of restricted stock. The restricted stock, which will vest ratably over a four-year
term, and the eligible options were granted under our 1996 Plan. The value was calculated
based on the closing price of the common stock on January 23, 2004 of $14.75 per share.
Subsequent to the exchange of options for restricted stock, Mr. Kafoure and the Company agreed
to a rescission of the exchange and Mr. Kafoure returned the restricted stock grant.4
    
    Includes $4,228 and $7,001 for use of a company car for Messrs. Elsesser and Kafoure respectively.5
    
    Includes $477,736 for a Deferred Share Award of 53,200 common shares.6
    
    Includes $54,232 for moving expenses.7
    
    The value was calculated based on the closing price of the
common stock on July 13, 2004 of $11.05 per share. Mr. Hutchison
has elected to disclaim ownership of the vested portion of his
restricted stock grant and has surrendered all rights thereunder.8
    
    Messrs. Alvarez, Suckow and Roizen, as employees of A&M, were designated as officers of IBC
pursuant to an amended and restated letter agreement dated September 21, 2004, further amended
and restated as of October 14, 2004 and amended on July 18, 2005 and elected by the Board of
Directors in September 2004, April 2005 and except for Mr. Roizen (see note 9), March 2006.9
    
    As Interim Chief Marketing Officer, Mr. Roizen stepped down from his position when Mr. Seban
was hired on August 1, 2005. 120




---



##### Table of Contents



10
    
    All other compensation for Mr. Kafoure for the fiscal year ended June 3, 2006 includes our
Companys contribution in the amount of $7,560, which accrued during such fiscal year for the
account of Mr. Kafoure under our Companys Retirement Income Plan, and $5,591 for the use of a
company car.11
    
    All other compensation for Mr. Hutchison for the fiscal year ended June 3, 2006 includes
$6,240 for the use of a company car, the imputed income for term life insurance provided by
our Company for the benefit of Mr. Hutchison in the amount of $966 and moving expenses of
$2,358. Stock Options
  Option Grants in the Fiscal Year Ended May 28, 2005
  Aggregated Option Exercises in Fiscal 2005 and Option Values at May 28, 2005
 Number of securitiesShares
    
    
    
    
    
    
    underlying unexercised options
    
    
    Value of unexercised in-theAcquired
    
    
    Value
    
    
    at fiscal year end
    
    
    money options at fiscal yearon exercise
    
    
    Realized
    
    
    (#)
    
    
    end ($)(#)
    
    
    ($)
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableName (a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    
    
    
    
    (e)James E. Elsesser
1
    
    
    0
    
    
    
    0
    
    
    
    90,000
    
    
    
    0
    
    
    
    0
    
    
    
    0Michael D. Kafoure
    
    
    0
    
    
    
    0
    
    
    
    565,074
    
    
    
    33,332
    
    
    
    0
    
    
    
    0Ronald B. Hutchison
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Antonio C. Alvarez
II
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0John K. Suckow
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Jacques E. Roizen
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 
 1
    
    Mr. Elsesser resigned September 21, 2004. Long Term Incentive Plan Awards in the Fiscal Year Ended May 28, 2005
  IBC Supplemental Executive Retirement Plan
   121




---



##### Table of Contents



SERP Table
 Years of ServiceAnnual
Average Earnings Over the Last 60 Months of Employment
    
    5
    
    10
    
    15
    
    20$100,000
    
    $
    9,000
    
    
    $
    18,000
    
    
    $
    27,000
    
    
    $
    36,000$200,000
    
    $
    18,000
    
    
    $
    36,000
    
    
    $
    54,000
    
    
    $
    72,000$300,000
    
    $
    27,000
    
    
    $
    54,000
    
    
    $
    81,000
    
    
    $
    108,000$400,000
    
    $
    36,000
    
    
    $
    72,000
    
    
    $
    108,000
    
    
    $
    144,000$500,000
    
    $
    45,000
    
    
    $
    90,000
    
    
    $
    135,000
    
    
    $
    180,000$600,000
    
    $
    54,000
    
    
    $
    108,000
    
    
    $
    162,000
    
    
    $
    216,000$700,000
    
    $
    63,000
    
    
    $
    126,000
    
    
    $
    189,000
    
    
    $
    252,000$800,000
    
    $
    72,000
    
    
    $
    144,000
    
    
    $
    216,000
    
    
    $
    288,000
  KERP PLAN
   122




---



##### Table of Contents



Retention Bonuses
  Restructuring Performance Bonuses
    Participation of Named Executive Officers
  Compensation of Directors
  123




---



##### Table of Contents



James R. Elsesser Employment Agreement
  Other Employment Agreements
  124




---



##### Table of Contents



Alvarez and Marsal Agreement
    Management Continuity Agreements
  125




---



##### Table of Contents




    
    an amount equal to two years of the executives salary (based on the executives
monthly base salary immediately prior to the change in control or the employment
termination date, whichever is greater) and bonus (equal to the target bonus under the IC
Plan or the most recent annual bonus received by the executive, whichever is greater);
    
    continued life, health, accident and disability benefits for two years following the
employment termination date;
    
    immediate and full vesting under our SERP and at least two additional years of credited
service under the SERP (except that the adjustment cannot result in the years of credited
service exceeding 20 years); and
    
    up to $15,000 of outplacement counseling services.
    Compensation Committee Interlocks and Insider Participation
  Option Exchange
  126




---



##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 Equity Compensation Plan Information
  Equity Compensation Plan Information as of May 28, 2005
 Number of securitiesWeighted-
    
    
    remaining available foraverage exercise
    
    
    future issuance underNumber of securities to be
    
    
    price of
    
    
    equity compensationissued upon exercise of
    
    
    outstanding
    
    
    plans (excludingoutstanding options,
    
    
    options, warrants
    
    
    securities reflected inwarrants and rights
    
    
    and rights
    
    
    column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity
compensation plans
approved by
security holders
    
    
    4,518,000
    
    
    $
    16.43
    
    
    
    7,667,000Equity compensation
plans not approved
by security holders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    4,518,000
    
    
    $
    16.43
    
    
    
    7,667,000
 Holdings of Principal Stockholders
  (3)Amount andnature of(1)
    
    (2)
    
    beneficial
    
    (4)Title of Class
    
    Name and address of beneficial owner
    
    ownership
    
    Percent of ClassCommon
    
    EagleRock Capital Management, L.L.C.1
551 Fifth Avenue, 34th Floor
New York, NY 10176
    
    
    4,013,176
    
    
    
    8.8
    %Common
    
    Brencourt Advisors, LLC 1
600 Lexington Avenue, 8th Floor
New York, NY 10022
    
    
    3,879,937
    
    
    
    8.5
    %Common
    
    Glenview Capital Management, LLC1
399 Park Avenue, Floor 39
New York, NY 10022
    
    
    3,782,781
    
    
    
    8.3
    %Common
    
    QVT Financial LP 1
527 Madison Avenue, 8th Floor
New York, NY 10022
    
    
    3,322,495
    
    
    
    7.32
    %Common
    
    Brandes Investment Partners, L.P.1
11988 El Camino Real, Suite 500
San Diego, CA 92130
    
    
    2,958,045
    
    
    
    6.5
    %Common
    
    Fidelity Management & Research Co. 1
82 Devonshire Street
Boston, MA 02109
    
    
    2,848,716
    
    
    
    6.277
    %
 127




---



##### Table of Contents



(3)Amount andnature of(1)
    
    (2)
    
    beneficial
    
    (4)Title of Class
    
    Name and address of beneficial owner
    
    ownership
    
    Percent of ClassCommon
    
    Ore Hill Partners LLC1
C/o Butterfield Fund Services (Cayman) Ltd.
PO Box 705GT
Butterfield House
68 Fort Street
Grand Cayman, Cayman Islands
    
    
    2,811,400
    
    
    
    6.19
    %
 
 1
    
    The information concerning beneficial ownership was obtained from Schedule 13G reports of
EagleRock Capital Management, L.L.C., Glenview Capital Management, LLC, QVT Financial LP,
Brandes Investment Partners, L.P., Fidelity Management & Research Co., and Ore Hill Partners
LLC filed with the Securities and Exchange Commission (SEC) on February 14, 2006, February
14, 2006, February 14, 2005, February 14, 2006, February 14, 2006, and February 14, 2006,
respectively and a Schedule 13D report of Brencourt Advisors, LLC filed with the SEC on July
21, 2006. Holdings of Officers and Directors
  (3)Amount and nature(1)
    
    (2)
    
    of beneficial
    
    (4)Title of Class
    
    Name of beneficial owner
    
    ownership
    
    Percent of ClassCommon
    
    Michael J. Anderson
    
    64,0951,2
    
    
    
    *Common
    
    G. Kenneth Baum
    
    230,8371,2,3
    
    
    
    *Common
    
    Leo Benatar
    
    109,3301,2
    
    
    
    *Common
    
    Robert B. Calhoun
    
    107,2571,2
    
    
    
    *Common
    
    Frank E. Horton
    
    70,5251,2
    
    
    
    *Common
    
    Ronald B. Hutchison
    
    6,6662
    
    
    
    *Common
    
    Michael D. Kafoure
    
    515,844,2
    
    
    1.09
    %Common
    
    Richard L. Metrick
    
    54,5251,2
    
    
    
    *Common
    
    Ronald L. Thompson
    
    9,5251,2
    
    
    
    *Common
    
    All Named Executive
Officers, directors and
executive officers as a
group (19 persons)
    
    1,523,172,2,4
    
    
    3.19
    %
 
 *
    
    Less than 1%1
    
    Of the shares indicated, 58,000 (Mr. Anderson), 100,000 (Mr. Baum), 100,000 (Mr.
Benatar), 100,000 (Mr. Calhoun) 60,000 (Dr. Horton), 510,000 (Mr. Kafoure), 40,000 (Mr.
Metrick), 5,000 (Mr. Thompson) and 1,297,000 (all directors, Named Executive Officers and
executive officers as a group) are attributable to currently exercisable employee stock
options or stock options exercisable within 60 days.2
    
    Of the shares indicated, 0 (Mr. Kafoure), 4,525 (Messrs. Anderson, Baum, Benatar,
Calhoun, Horton, Metrick and Thompson), and 60,485 (all directors, Named Executive Officers
and executive officers as a group) are attributable to shares of restricted stock.3
    
    Mr. Baum is a director and Chairman of the Board of George K. Baum Group, Inc. Mr.
Baum is also the majority stockholder of George K. Baum Group, Inc. Of the 230,837 shares
indicated, 77,858 are held by George K. Baum Group, Inc. Mr. Baum may be deemed to
beneficially own all 77,858 shares of the Common Stock held by George K. Baum Group, Inc.4
    
    James R. Elsesser, Paul E. Yarick and Charles A. Sullivan retired from their positions
with IBC on September 21, 2004, September 10, 2004 and July 31, 2005, respectively.
Accordingly, any shares of our common stock beneficially owned by these individuals have not
been included in the preceding table. 128




---



##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
      129




---



##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Fees Paid to our Independent Registered Public Accounting Firm
  Audit Fees
 Audit Related Fees
 Tax Fees
 All Other Fees
 Audit Committee Pre-Approval Policy
  130




---



##### Table of Contents



Audit
 Audit-Related
 Tax
 Other Fees
   131




---



##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE
  1.
    
    Financial Statements
        2.
    
    Financial Statement Schedule
   3.
    
    Exhibits
 132




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit3.1
    
    Restated Certificate of Incorporation of
Interstate Bakeries Corporation, as
amended (incorporated herein by reference
to Exhibit 3.1 to Interstate Bakeries
Corporations Amendment No. 1 to its
Quarterly Report on Form 10-Q for the
quarter ended March 9, 2002, filed on
April 19, 2002).3.2
    
    Restated Bylaws of Interstate Bakeries
Corporation (incorporated herein by
reference to Exhibit 3.1 to Interstate
Bakeries Corporations Quarterly Report
on Form 10-Q for the quarter ended
November 15, 2003 filed on December 22,
2003).4.1
    
    Preferred Stock Purchase Rights Agreement
effective as of May 8, 2000 (incorporated
herein by reference to the Current Report
on Form 8-K of Interstate Bakeries
Corporation filed on May 16, 2000).10.1
    
    Employment Agreement, dated as of
September 4, 2002, by and among
Interstate Bakeries Corporation,
Interstate Brands Corporation and James
R. Elsesser (incorporated herein by
reference to Exhibit 10.1 to the Current
Report on Form 8-K of Interstate Bakeries
Corporation filed on October 3, 2002).#10.2
    
    Deferred Share Award Notice dated as of
October 1, 2002 by and between Interstate
Bakeries Corporation and James R.
Elsesser (incorporated herein by
reference to Exhibit 10.2 to the Current
Report on Form 8-K of Interstate Bakeries
Corporation filed on October 3, 2002).#10.3
    
    Consulting Agreement dated as of October
2, 2002 and effective as of September 30,
2002 by and among Interstate Bakeries
Corporation, Interstate Brands
Corporation, Interstate Brands West
Corporation and Charles A. Sullivan
(incorporated herein by reference to
Exhibit 10.3 to the Current Report on
Form 8-K of Interstate Bakeries
Corporation filed on October 3, 2002).#10.3.1
    
    Amendment to the Consulting Agreement
dated as of June 24, 2004, by and among
Interstate Bakeries Corporation,
Interstate Brands Corporation, Interstate
Brands West Corporation and Charles A.
Sullivan (incorporated herein by reference to Exhibit 10.3.1 to Interstate Bakeries Corporations Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).#10.4
    
    Employment Agreement dated as of March 8,
2003 by and between Michael D. Kafoure
and Interstate Brands West Corporation
(incorporated herein by reference to
Exhibit 10.2 to Interstate Bakeries
Corporations Quarterly Report on Form
10-Q for the quarter ended March 8, 2003,
filed April 22, 2003).#10.5
    
    Employment Agreement dated as of March 7,
2003 by and between Robert P. Morgan and
Interstate Brands Corporation
(incorporated herein by reference to
Exhibit 10.3 to Interstate Bakeries
Corporations Quarterly Report on Form
10-Q for the quarter ended March 8, 2003,
filed April 22, 2003).#10.6
    
    Employment Agreement dated as of March
18, 2003 by and between Richard D.
Willson and Interstate Brands West
Corporation (incorporated herein by
reference to Exhibit 10.4 to Interstate
Bakeries Corporations Quarterly Report
on Form 10-Q for the quarter ended March
8, 2003, filed April 22, 2003).#
 133




---



##### Table of Contents



Exhibit No.
    
    Exhibit10.7
    
    Employment Agreement dated as of March 7,
2003 by and between Thomas S.
Bartoszewski and Interstate Brands
Corporation (incorporated herein by
reference to Exhibit 10.5 to Interstate
Bakeries Corporations Quarterly Report
on Form 10-Q for the quarter ended March
8, 2003, filed April 22, 2003).#10.8
    
    Management Continuity Agreement effective
as of February 3, 2003 by and between
James R. Elsesser and Interstate Bakeries
Corporation (incorporated herein by
reference to Exhibit 10.6 to Interstate
Bakeries Corporations Quarterly Report
on Form 10-Q for the quarter ended March
8, 2003, filed April 22, 2003).#10.9
    
    Form of Management Continuity Agreement
effective as of February 3, 2003 by and
between Interstate Bakeries Corporation
and Paul E. Yarick, Michael D. Kafoure,
Kent B. Magill, Robert P. Morgan, Richard
D. Willson and Thomas S. Bartoszewski
(incorporated herein by reference to
Exhibit 10.7 to Interstate Bakeries
Corporations Quarterly Report on Form
10-Q for the quarter ended March 8, 2003,
filed April 22, 2003).#10.10
    
    Amended and Restated Credit Agreement
among Interstate Bakeries Corporation, as
a Guarantor, Interstate Brands
Corporation and Interstate Brands West
Corporation, each as a Borrower, the
several Lenders from time to time parties
hereto, and The Chase Manhattan Bank, as
Administrative Agent, dated as of April
25, 2002 (incorporated herein by
reference to Exhibit 10.3 to Interstate
Bakeries Corporations Amendment No. 2 to
its Registration Statement on Form S-3,
File No. 333-86560, filed May 8, 2002).10.10.1
    
    First Amendment, dated as of April 21,
2003, to the Amended and Restated Credit
Agreement among Interstate Bakeries
Corporation, as a Guarantor, Interstate
Brands Corporation and Interstate Brands
West Corporation, each as a Borrower, the
several Lenders from time to time parties
hereto, and The Chase Manhattan Bank, as
Administrative Agent (incorporated herein
by reference to Exhibit 10.1 to
Interstate Bakeries Corporations
Quarterly Report on Form 10-Q for the
quarter ended March 8, 2003, filed April
22, 2003).10.10.2
    
    Second Amendment, dated as of May 7,
2004, to the Amended and Restated Credit
Agreement among Interstate Bakeries
Corporation, as a Guarantor, Interstate
Brands Corporation and Interstate Brands
West Corporation, each as a Borrower, the
several Lenders from time to time parties
hereto, and The Chase Manhattan Bank, as
Administrative Agent (incorporated herein
by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Interstate
Bakeries Corporation filed on August 12,
2004).10.10.3
    
    Third Amendment, dated as of May 27,
2004, to the Amended and Restated Credit
Agreement among Interstate Bakeries
Corporation, as a Guarantor, Interstate
Brands Corporation and Interstate Brands
West Corporation, each as a Borrower, the
several Lenders from time to time parties
hereto, and The Chase Manhattan Bank, as
Administrative Agent (incorporated herein
by reference to Exhibit 10.2 to the
Current Report on Form 8-K of Interstate
Bakeries Corporation filed on August 12,
2004).10.10.4
    
    Fourth Amendment, dated as of June 17,
2004, to the Amended and Restated Credit
Agreement among Interstate Bakeries
Corporation, as a Guarantor, Interstate
Brands Corporation and Interstate Brands
West Corporation, each as a Borrower, the
several Lenders from time to time parties
hereto, and The Chase Manhattan Bank, as
Administrative Agent (incorporated herein
by reference to Exhibit 10.3 to the
Current Report on Form 8-K of Interstate
Bakeries Corporation filed on August 12,
2004).
 134




---



##### Table of Contents



Exhibit No.
    
    Exhibit10.10.5
    
    Fifth Amendment, dated as of August 12,
2004, to the Amended and Restated Credit
Agreement among Interstate Bakeries
Corporation, as a Guarantor, Interstate
Brands Corporation and Interstate Brands
West Corporation, each as a Borrower, the
several Lenders from time to time parties
hereto, and The Chase Manhattan Bank, as
Administrative Agent (incorporated herein
by reference to Exhibit 10.4 to the
Current Report on Form 8-K of Interstate
Bakeries Corporation filed on August 12,
2004).10.10.6
    
    Sixth Amendment, dated as of September 7,
2004, to the Amended and Restated Credit
Agreement, dated April 25, 2002, among
Interstate Bakeries Corporation, as a
Guarantor, Interstate Brands Corporation
and Interstate Brands West Corporation,
each as a Borrower, the several Lenders
from time to time parties thereto, The
Bank of Nova Scotia, BNP Paribas,
Cooperatieve Central
Raiffeisen-Boerenleenbank B.A., Rabobank
International, New York Branch, and
SunTrust Bank, each as a co-documentation
agent, Bank of America, N.A., as
syndication agent and JPMorgan Chase
Bank, as administrative agent
(incorporated herein by reference to
Exhibit 10.1 to the Current Report on
Form 8-K of Interstate Bakeries
Corporation filed on September 13, 2004).10.10.7
    
    Seventh Amendment to the Amended and
Restated Credit Agreement dated as of
March 18, 2005, by and among the
Interstate Bakeries Corporation,
Interstate Brands Corporation (the
Borrower), the several banks and other
financial institutions or entities from
time to time parties thereto (the
Lenders), The Bank of Nova Scotia, BNP
Paribas, Cooperatieve Central
Raiffeisen-Boerenleenbank B.A., Rabobank
International, New York Branch, and
SunTrust Bank, each as a co-documentation
agent (the Co-Documentation Agents),
Bank of America, N.A., as syndication
agent (the Syndication Agent) and
JPMorgan Chase Bank (JPMorgan), as
administrative agent (incorporated herein
by reference to the Current Report on
Form 8-K of Interstate Bakeries
Corporation filed on March 22, 2005).10.11
    
    Guarantee and Collateral Agreement made
by Interstate Bakeries Corporation,
Interstate Brands Corporation, Interstate
Brands West Corporation and certain of
their Subsidiaries, in favor of The Chase
Manhattan Bank, as Administrative Agent,
dated as of July 19, 2001 (incorporated
herein by reference to Exhibit 10.4 to
the Annual Report on Form 10-K of
Interstate Bakeries Corporation filed on
August 24, 2001).10.12
    
    Amended and Restated Interstate Bakeries
Corporation 1996 Stock Incentive Plan
(incorporated herein by reference to
Exhibit 10.1 to Interstate Bakeries
Corporations Quarterly Report on Form
10-Q for the quarter ended March 6, 2004
filed on April 19, 2004).#10.13
    
    Interstate Bakeries Corporation Incentive Compensation Plan (incorporated herein by
reference to Interstate Bakeries Corporation Amendment No. 2 to its Registration
Statement on Form S-3, File No. 333-86560, filed on May 8, 2002).#10.14
    
    Interstate Bakeries Corporation 1993 Non-Qualified Deferred Compensation Plan
(incorporated herein by reference to Interstate Bakeries Corporation Amendment No. 2 to
its Registration Statement on Form S-3, File No. 333-86560, filed on May 8, 2002).#10.14.1
    
    First Amendment to Interstate Brands Corporation 1993 Non-Qualified Deferred Compensation
Plan (incorporated herein by reference to Exhibit 10.1 to Interstate Bakeries
Corporations Quarterly Report on Form 10-Q for the quarter ended November 15, 2003 filed
on December 22, 2003).#
 135




---



##### Table of Contents



Exhibit No.
    
    Exhibit10.15
    
    Interstate Bakeries Corporation Amended and Restated Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10.15 to Interstate Bakeries Corporations Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).#10.16
    
    Interstate Bakeries Corporation Rabbi Trust Agreement (incorporated herein by reference
to Exhibit 10.8 to the Annual Report on Form 10-K of Interstate Bakeries Corporation
filed on August 23, 2002).#10.16.1
    
    First Amendment to the IBC Rabbi Trust Agreement effective August 8, 2003 (incorporated
herein by reference to Exhibit 10.19.1 to Interstate Bakeries Corporations Annual Report
on Form 10-K filed on August 23, 2003).#10.17
    
    Form of Award Notice and Non-Qualified Stock Option Agreement pursuant to the Interstate
Bakeries Corporation 1996 Stock Incentive Plan (incorporated herein by reference to
Exhibit 10.9 to the Annual Report on Form 10-K of Interstate Bakeries Corporation filed
on August 23, 2002).#10.18
    
    Form of Award Notice and Incentive Stock Option Agreement pursuant to the Interstate
Bakeries Corporation 1996 Stock Incentive Plan (incorporated herein by reference to
Exhibit 10.10 to the Annual Report on Form 10-K of Interstate Bakeries Corporation filed
on August 23, 2002).#10.19
    
    Employment Agreement dated as of July 13, 2004 by and between Ronald B. Hutchison and
Interstate Bakeries Corporation (incorporated herein by reference to Exhibit 10.19 to Interstate Bakeries Corporations Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).#10.20
    
    Management Continuity Agreement dated as of July 13, 2004 by and between Ronald B.
Hutchison and Interstate Bakeries Corporation (incorporated herein by reference to Exhibit 10.20 to Interstate Bakeries Corporations Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).#10.21
    
    Form of Indenture for 6.0% Senior Subordinated Convertible Notes Due 2014 (incorporated
herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Interstate
Bakeries Corporation filed on August 12, 2004).10.22
    
    Form of Purchase Agreement for 6.0% Senior Subordinated Convertible Notes Due 2014
(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of
Interstate Bakeries Corporation filed on August 12, 2004).10.23
    
    Form of Registration Rights Agreement for 6.0% Senior Subordinated Convertible Notes Due
2014 (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K
of Interstate Bakeries Corporation filed on August 12, 2004).10.24
    
    Letter Agreement, dated as of August 27, 2004, amended and restated as of September 21,
2004 and further amended and restated on October 14, 2004, by and between Alvarez and
Marsal, Inc. and Interstate Bakeries Corporation, Armour & Main Redevelopment
Corporation, Bakers Inn Quality Baked Goods, LLC, IBC Sales Corporation, IBC Services,
LLC, IBC Trucking LLC, Interstate Brands Corporation, New England Bakery Distributors,
LLC and Mrs. Cubbisons Foods, Inc (incorporated herein by reference to Exhibit 10.24 to Interstate Bakeries Corporations Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).#10.24.1
    
    Letter Agreement, dated as of July 18, 2005, by and between Alvarez and Marsal, Inc. and
Interstate Bakeries Corporation, Armour & Main Redevelopment Corporation, Bakers Inn
Quality Baked Goods, LLC, IBC Sales Corporation, IBC Services, LLC, IBC Trucking LLC,
Interstate Brands Corporation, New England Bakery Distributors, LLC and Mrs. Cubbisons
Foods, Inc (incorporated herein by reference to Exhibit 10.24.1 to Interstate Bakeries Corporations Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).#
 136




---



##### Table of Contents



Exhibit No.
    
    Exhibit10.25
    
    Revolving Credit Agreement, dated as of September 23, 2004, among Interstate Bakeries
Corporation (Parent Borrower), a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, and each of the direct and indirect subsidiaries
of the Parent Borrower party to this Agreement (each individually a Subsidiary Borrower
and collectively the Subsidiary Borrowers; and together with the Parent Borrower, the
Borrowers), each of which is a debtor and debtor-in-possession in a case pending under
Chapter 11 of the Bankruptcy Code (the cases of the Borrowers, each a Case and
collectively, the Cases), JPMorgan Chase Bank (JPMCB), and each of the other
commercial banks, finance companies, insurance companies or other financial institutions
or funds from time to time party hereto (together with JPMCB, the Lenders), J.P. Morgan
Securities Inc., as lead arranger and book runner, JPMorgan Chase Bank, as administrative
agent (in such capacity, the Administrative Agent) for the Lenders, and JPMorgan Chase
Bank, as collateral agent (in such capacity, the Collateral Agent) for the Lenders
(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of
Interstate Bakeries Corporation filed on September 27, 2004).10.25.1
    
    First Amendment, dated as of November 1, 2004, to the Revolving Credit Agreement) dated
as of September 23, 2004, among Interstate Bakeries Corporation (Parent Borrower), a
debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy
Code, and each of the direct and indirect subsidiaries of the Parent Borrower party to
this Agreement (each individually a Subsidiary Borrower and collectively the
Subsidiary Borrowers; and together with the Parent Borrower, the Borrowers), each of
which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the
Bankruptcy Code (the cases of the Borrowers, each a Case and collectively, the
Cases), JPMorgan Chase Bank (JPMCB), and each of the other commercial banks, finance
companies, insurance companies or other financial institutions or funds from time to time
party hereto (together with JPMCB, the Lenders), J.P. Morgan Securities Inc., as lead
arranger and book runner, JPMorgan Chase Bank, as administrative agent (in such capacity,
the Administrative Agent) for the Lenders, and JPMorgan Chase Bank, as collateral agent
(in such capacity, the Collateral) for the Lenders (incorporated herein by reference to
the Current Report on Form 8-K of Interstate Bakeries Corporation filed on November 5,
2004).10.25.2
    
    Second Amendment, effective as of January 20, 2005, to the Revolving Credit Agreement,
dated as of September 23, 2004, among Interstate Bakeries Corporation (Parent
Borrower), a debtor and debtor-in-possession in a case pending under Chapter 11 of the
Bankruptcy Code, and each of the direct and indirect subsidiaries of the Parent Borrower
party to this Agreement (each individually a Subsidiary Borrower and collectively the
Subsidiary Borrowers; and together with the Parent Borrower, the Borrowers), each of
which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the
Bankruptcy Code (the cases of the Borrowers, each a Case and collectively, the
Cases), JPMorgan Chase Bank (JPMCB), and each of the other commercial banks, finance
companies, insurance companies or other financial institutions or funds from time to time
party hereto (together with JPMCB, the Lenders), J.P. Morgan Securities Inc., as lead
arranger and book runner, JPMorgan Chase Bank, as administrative agent (in such capacity,
the Administrative Agent) for the Lenders, and JPMorgan Chase Bank, as collateral agent
(in such capacity, the Collateral) for the Lenders (incorporated herein by reference to
the Current Report on Form 8-K of Interstate Bakeries Corporation filed on February 1,
2005).
 137




---



##### Table of Contents



Exhibit No.
    
    Exhibit10.25.3
    
    Third Amendment and Waiver, dated as of May 26, 2005, to the Revolving Credit Agreement,
dated as of September 23, 2004, as amended, among Interstate Bakeries Corporation, a
Delaware corporation (Parent Borrower), a debtor and debtor-in-possession in a case
pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect
subsidiaries of the Parent Borrower (each individually a Subsidiary Borrower and
collectively the Subsidiary Borrowers; and together with the Parent Borrower, the
Borrowers), each of which is a debtor and debtor-in-possession in a case pending under
Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking
association (formerly known as JPMorgan Chase Bank) (JPMCB), and each of the other
commercial banks, finance companies, insurance companies or other financial institutions
or funds from time to time party to the Credit Agreement (together with JPMCB, the
Lenders), JPMorgan Chase Bank, N.A., a national banking association (formerly known as
JPMorgan Chase Bank), as administrative agent (the Administrative Agent) for the
Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as
JPMorgan Chase Bank), as collateral agent (the Collateral Agent) for the Lenders
(incorporated herein by reference to the Current Report on Form 8-K of Interstate
Bakeries Corporation filed on May 27, 2005).10.25.4
    
    Fourth Amendment and Waiver, dated as of November 30, 2005, to the Revolving Credit
Agreement, dated as of September 23, 2004, as amended, among Interstate Bakeries
Corporation, a Delaware corporation (Parent Borrower), a debtor and
debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of
the direct and indirect subsidiaries of the Parent Borrower (each individually a
Subsidiary Borrower and collectively the Subsidiary Borrowers; and together with the
Parent Borrower, the Borrowers), each of which is a debtor and debtor-in-possession in
a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a
national banking association (formerly known as JPMorgan Chase Bank) (JPMCB), and each
of the other commercial banks, finance companies, insurance companies or other financial
institutions or funds from time to time party to the Credit Agreement (together with
JPMCB, the Lenders), JPMorgan Chase Bank, N.A., a national banking association
(formerly known as JPMorgan Chase Bank), as administrative agent (the Administrative
Agent) for the Lenders, and JPMorgan Chase Bank, N.A., a national banking association
(formerly known as JPMorgan Chase Bank), as collateral agent (the Collateral Agent) for
the Lenders (incorporated herein by reference to the Current Report on Form 8-K of
Interstate Bakeries Corporation filed on December 5, 2005).10.25.5
    
    Fifth Amendment, dated as of December 27, 2005, to the Revolving Credit Agreement, dated
as of September 23, 2004, as amended, among Interstate Bakeries Corporation (Parent
Borrower), a Delaware corporation, a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of
the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking
association (formerly known as JPMorgan Chase Bank) (JPMCB), and each of the other
commercial banks, finance companies, insurance companies or other financial institutions
or funds from time to time party to the Credit Agreement (together with JPMCB, the
Lenders), JPMorgan Chase Bank, N.A., a national banking association (formerly known as
JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank,
N.A., a national banking association (formerly known as JPMorgan Chase Bank), as
collateral agent for the Lenders (incorporated herein by reference to the Current Report
on Form 8-K of Interstate Bakeries Corporation filed on December 30, 2005).
 138




---



##### Table of Contents



Exhibit No.
    
    Exhibit10.25.6
    
    Sixth Amendment, dated as of March 29, 2006, to the Revolving Credit Agreement, dated as
of September 23, 2004, as amended, among Interstate Bakeries Corporation (Parent
Borrower), a Delaware corporation, a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of
the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking
association (formerly known as JPMorgan Chase Bank) (JPMCB), and certain of the other
commercial banks, finance companies, insurance companies or other financial institutions
or funds from time to time party to the Credit Agreement (together with JPMCB, the
Lenders), JPMorgan Chase Bank, N.A., a national banking association (formerly known as
JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank,
N.A., a national banking association (formerly known as JPMorgan Chase Bank), as
collateral agent for the Lenders (incorporated herein by reference to the Current Report
on Form 8-K of Interstate Bakeries Corporation filed on March 29, 2006).10.25.7
    
    Seventh Amendment, dated as of June 28, 2006, to the Revolving Credit Agreement, dated
as of September 23, 2004, as amended, among Interstate Bakeries Corporation (Parent
Borrower), a Delaware corporation, a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of
the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking
association (formerly known as JPMorgan Chase Bank) (JPMCB), and each of the other
commercial banks, finance companies, insurance companies or other financial institutions
or funds from time to time party to the Credit Agreement (together with JPMCB, the
Lenders), JPMorgan Chase Bank, N.A., a national banking association (formerly known as
JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank,
N.A., a national banking association (formerly known as JPMorgan Chase Bank), as
collateral agent for the Lenders (incorporated herein by reference to the Current Report
on Form 8-K of Interstate Bakeries Corporation filed on June 30, 2006).10.25.8
    
    Eighth Amendment, dated as of August 24, 2006, to the Revolving Credit Agreement, dated
as of September 23, 2004, as amended, among Interstate Bakeries Corporation (Parent
Borrower), a Delaware corporation, a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of
the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending
under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking
association (formerly known as JPMorgan Chase Bank) (JPMCB), and each of the other
commercial banks, finance companies, insurance companies or other financial institutions
or funds from time to time party to the Credit Agreement (together with JPMCB, the
Lenders), JPMorgan Chase Bank, N.A., a national banking association (formerly known as
JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank,
N.A., a national banking association (formerly known as JPMorgan Chase Bank), as
collateral agent for the Lenders (incorporated herein by reference to the Current Report
on Form 8-K of Interstate Bakeries Corporation filed on August 30, 2006).10.26
    
    Offer of Employment dated July 13, 2005 between Interstate Bakeries Corporation and Mr.
Richard C. Seban (incorporated herein by reference to the Current Report on Form 8-K of
Interstate Bakeries Corporation filed on August 5, 2005).#10.27
    
    Interstate Bakeries Corporation Key Employee Retention Plan (incorporated herein by reference to Exhibit 10.27 to Interstate Bakeries Corporations Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).21.1
    
    Subsidiaries of Interstate Bakeries Corporation.*24.1
    
    Power of Attorney (included on signature page).31.1
    
    Certification of Antonio C. Alvarez II pursuant to Rule 13a-14(a)/15d-14(a)*
 139




---



##### Table of Contents



Exhibit No.
    
    Exhibit31.2
    
    Certification of Ronald B. Hutchison pursuant to Rule 13a-14(a)/15d-14(a)*32.1
    
    Certification of Antonio C. Alvarez II pursuant to 18 U.S.C. Section 1350*32.2
    
    Certification of Ronald B. Hutchison pursuant to 18 U.S.C. Section 1350*
 
 #
    
    Management contracts or compensatory plans or arrangements required to be identified by Item
15(a).*
    
    Filed herewith 140




---



##### Table of Contents



SIGNATURES
  INTERSTATE BAKERIES CORPORATIONDated:
  October 6, 2006
    
    By:
    
    /s/ Antonio C. Alvarez IIAntonio C. Alvarez IIChief Executive Officer(Principal Executive Officer)
   Name of Signatory
    
    Capacities In Which Signing
    
    Date/s/ Antonio C. Alvarez II
    
    Chief Executive Officer (Principal Executive
    
    October 6, 2006Antonio C. Alvarez II
    
    Officer)/s/ Ronald B. Hutchison
    
    Executive Vice President  Chief Financial
    
    October 6, 2006Ronald B. Hutchison
    
    Officer
(Principal Financial and
Accounting Officer)/s/ Leo Benatar
    
    Non-Executive Chairman of the Board
    
    October 6, 2006Leo Benatar/s/ Michael J. Anderson
    
    Director
    
    October 6, 2006Michael J. Anderson/s/ G. Kenneth Baum
    
    Director
    
    October 6, 2006G. Kenneth Baum/s/ Robert B. Calhoun
    
    Director
    
    October 6, 2006Robert B. Calhoun
 141




---



##### Table of Contents



Name of Signatory
    
    Capacities In Which Signing
    
    Date/s/ Frank E. Horton
    
    Director
    
    October 6, 2006Frank E. Horton/s/ Richard L. Metrick
    
    Director
    
    October 6, 2006Richard L. Metrick/s/ Ronald L. Thompson
    
    Director
    
    October 6, 2006Ronald L. Thompson
 142




---



##### Table of Contents



INTERSTATE BAKERIES CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FIFTY-TWO WEEKS ENDED MAY 28, 2005, MAY 29, 2004, AND MAY 31, 2003  (dollars in thousands)
 Balance at
    
    
    
    
    
    
    Accounts
    
    
    Balancebeginning
    
    
    Adjustments
    
    
    charged
    
    
    at end ofDescription
    
    of period
    
    
    to expense
    
    
    off
    
    
    period2005:Reserve for discounts and allowances on accounts receivable
    
    $
    3,839
    
    
    $
    2,671
    
    
    $
    
    
    
    $
    6,510Allowance for doubtful accounts
    
    
    3,700
    
    
    
    2,032
    
    
    
    (2,240
    )
    
    
    3,492$
    7,539
    
    
    $
    4,703
    
    
    $
    (2,240
    )
    
    $
    10,0022004:Reserve for discounts and allowances on accounts receivable
    
    $
    4,486
    
    
    $
    (647
    )
    
    $
    
    
    
    $
    3,839Allowance for doubtful accounts
    
    
    4,000
    
    
    
    1,427
    
    
    
    (1,727
    )
    
    
    3,700$
    8,486
    
    
    $
    780
    
    
    $
    (1,727
    )
    
    $
    7,5392003:Reserve for discounts and allowances on accounts receivable
    
    $
    4,468
    
    
    $
    18
    
    
    $
    
    
    
    $
    4,486Allowance for doubtful accounts
    
    
    4,200
    
    
    
    3,226
    
    
    
    (3,426
    )
    
    
    4,000$
    8,668
    
    
    $
    3,244
    
    
    $
    (3,426
    )
    
    $
    8,486
 143