##### 



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 June 2, 2007
 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
(State or other jurisdiction 
of incorporation or organization)
    
    43-1470322
(I.R.S. Employer
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
 þ o
 þ
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE: None




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INDEX
 Page NumberFORWARD-LOOKING STATEMENTS
    
    
    1PART IITEM 1. BUSINESS
    
    
    5ITEM 1A. RISK FACTORS
    
    
    12ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    23ITEM 2. PROPERTIES
    
    
    23ITEM 3. LEGAL PROCEEDINGS
    
    
    23ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    26PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    27ITEM 6. SELECTED FINANCIAL DATA
    
    
    29ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    30ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    47ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    48ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    100ITEM 9A. CONTROLS AND PROCEDURES
    
    
    100ITEM 9B. OTHER INFORMATION
    
    
    105PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    106ITEM 11. EXECUTIVE COMPENSATION
    
    
    108ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    123ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
    
    
    125ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    127PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
    
    
    129




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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 February 9, 2008;
    
    our ability to implement our business plan developed as a basis for our discussion regarding one or
more plans of reorganization;
    
    our ability to obtain concessions from our unionized workforce to reduce costs and allow for greater
flexibility in the method and manner of distributing our products;
    
    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 cost increases in materials, ingredients, energy, and employee wages and benefits;
    
    risks associated with our restructuring activities, including the risks associated with achieving the
desired savings in connection with our profit center restructuring and bakery and route consolidations
and desired results of the initiatives currently being implemented (as described below);
    
    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 attract, motivate and/or retain key executives and employees;
    
    changes in our relationship with employees and the unions that represent them;
    
    successful implementation of information technology improvements;
 1




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
    
    increased costs and uncertainties with respect to the American Bakers Association Retirement Plan, or
ABA Plan;
    
    successful remediation of material weaknesses in our internal controls;
    
    changes to dietary guidelines;
    
    the continuing effects of changes in consumers eating habits;
    
    the performance of our recent new product introductions, including the
success of such new products in achieving and retaining market share;
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 those
relationships and contracts that are critical to our operations, in light of the Chapter 11
process;
    
    our ability to maintain adequate liquidity and working capital under our DIP Facility, as well as
our ongoing ability to purchase from vendors on satisfactory terms throughout the reorganization;
    
    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;
    
    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
 2




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the pricing of products, improved efficiencies and other strategies;
    
    increased pension, health care, workers compensation and other employee costs;
    
    actions of competitors, including pricing policies 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 processing systems;
    
    changes in general economic and business conditions (including 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;
    
    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;
    
    our ability to obtain concessions from our unionized workforce to reduce costs and allow for greater
flexibility in the method and manner of distributing our products;
    
    obligations and uncertainties with respect to the ABA 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, including the success of such new products in
achieving and retaining market share;
    
    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 without limitation
any
 3




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##### 



litigation stemming from 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.
   4




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PART I
 
 ITEM 1. BUSINESS
 General
 ® ® ® ® ® ® ® ® ® ® ® ® ® ®
   Proceedings Under Chapter 11 of the Bankruptcy Code
   5




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
    
    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.
       6




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
    
    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.
   Company History
  ® ®
 7




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® ® ® ®
 Financial Information about Segments
  Wholesale Operations
 Retail Operations
   8




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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sDing Dongs
    
    Devil DogsHoHos
    
    Ring DingsSuzy-Qs
    
    YodelsYankee DoodlesZingersOther
    
    Mrs. Cubbisons(Croutons and stuffing mix)
    
    Marie Callenders*
 
 *
    
    Licensed brands ® ® ® ® ® ® ® ® ® ® ® ® ® ® ®
 ® ®
 Marketing and Distribution
  9




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Sources and Availability of Raw Materials
   10




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Employees
  Competition
  Governmental Regulation; Environmental Matters
    11




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##### 



Availability of Reports; Website Access
  
 ITEM 1A. RISK FACTORS
  12




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##### 



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.
   13




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##### 



Terms of collective bargaining agreements and labor disruptions could adversely impact our
results of operations.
  We face significant challenges and uncertainties in connection with the implementation of our
business plan.
  14




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##### 



We face significant challenges and uncertainties in connection with the development of a plan
of reorganization.
   The Chapter 11 process and the DIP Facility impose restrictions on the conduct of our
business.
   15




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##### 



Our financial statements assume we can continue as a going concern.
    Our reorganization will require substantial effort by management and may impact our ability to
attract, retain and compensate key personnel.
  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.
  16




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##### 



Implementation of various information technology systems could disrupt our business and
adversely affect our financial condition and results of operations.
  Our internal control over financial reporting was not effective as of June 2, 2007 and
weaknesses in our internal controls and procedures could adversely affect our financial condition.
   Declining demand for our products could have adverse effects on our financial results.
  Dietary
Guidelines for Americans
 17




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##### 



We may have difficulty in maintaining relationships and material contracts with our suppliers.
  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.
  18




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##### 



Price increases could reduce demand for our products.
  Competition could adversely impact our results of operations.
   We may be obligated to make additional contributions, or incur withdrawal liability, to
multi-employer pension plans.
   19




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##### 



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.
  20




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##### 



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.
 ® ® ® ® ® ® ®
 Further consolidation in the retail food industry may adversely impact profitability.
  21




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##### 



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.
   Government regulation could adversely impact our operations.
  22




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##### 



ITEM 1B. UNRESOLVED STAFF COMMENTS.
  
 ITEM 2. PROPERTIES
 Bakeries
  Birmingham, Alabama
    
    Schiller Park, Illinois
    
    Rocky Mount, North CarolinaAnchorage, Alaska
    
    Columbus, Indiana
    
    Akron, OhioGlendale, California
    
    Indianapolis, Indiana
    
    Cincinnati, OhioLos Angeles, California (3)
    
    Waterloo, Iowa
    
    Columbus, OhioOakland, California
    
    Emporia, Kansas
    
    Defiance, OhioPomona, California
    
    Lenexa, Kansas
    
    Northwood, OhioSacramento, California
    
    Alexandria, Louisiana
    
    Tulsa, OklahomaSan Diego, California
    
    Biddeford, Maine
    
    Philadelphia, PennsylvaniaDenver, Colorado
    
    Boonville, Missouri
    
    Knoxville, TennesseeJacksonville, Florida
    
    Springfield, Missouri
    
    Memphis, TennesseeOrlando, Florida
    
    St. Louis, Missouri
    
    Ogden, UtahColumbus, Georgia
    
    Billings, Montana
    
    Salt Lake City, UtahDecatur, Illinois
    
    Henderson, Nevada
    
    Seattle, WashingtonHodgkins, Illinois
    
    Wayne, New JerseyPeoria, Illinois
    
    Jamaica, New York
 Other Properties
  
 ITEM 3. LEGAL PROCEEDINGS
   23




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##### 



24




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##### 



25




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##### 



Accounting for Contingencies
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  26




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##### 



PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
    Stock Price
 Fiscal Year
    
    Quarter
    
    High
    
    Low
    
    Cash Dividends2007
    
    
    1
    
    
    $
    8.45
    
    
    $
    4.60
    
    
    
    2
    
    
    
    5.20
    
    
    
    2.50
    
    
    
    3
    
    
    
    3.60
    
    
    
    2.11
    
    
    
    4
    
    
    
    4.00
    
    
    
    2.55
    
    
    
    2006
    
    
    1
    
    
    $
    11.85
    
    
    $
    5.95
    
    
    
    2
    
    
    
    11.95
    
    
    
    8.55
    
    
    
    3
    
    
    
    8.40
    
    
    
    6.45
    
    
    
    4
    
    
    
    9.80
    
    
    
    7.14
    
    
    
    
    27




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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 Issuer Purchases of Equity Securities (A)
 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(B)
    
    
    (or Unit)
    
    
    or Programs
    
    
    Plans or ProgramsPeriod 1
June 4-July 1, 2006
    
    
    3
    
    
    $
    7.80
    
    
    
    3
    
    
    
    7,396,685Period 2
July 2-July 29, 2006
    
    
    9
    
    
    $
    6.58
    
    
    
    9
    
    
    
    7,396,676Period 3 
July 30-Aug 26, 2006
    
    
    9
    
    
    $
    5.77
    
    
    
    9
    
    
    
    7,396,667Period 4
Aug 27-Sept 23, 2006
    
    
    2
    
    
    $
    3.86
    
    
    
    2
    
    
    
    7,396,665Period 5
Sept 24-Oct 21, 2006
    
    
    5
    
    
    $
    2.92
    
    
    
    5
    
    
    
    7,396,660Period 6
Oct 22-Nov 18, 2006
    
    
    6
    
    
    $
    2.83
    
    
    
    6
    
    
    
    7,396,654Period 7 
Nov 19-Dec 16, 2006
    
    
    5
    
    
    $
    2.79
    
    
    
    5
    
    
    
    7,396,649Period 8
Dec 17, 2006-Jan 13, 2007
    
    
    1
    
    
    $
    2.86
    
    
    
    1
    
    
    
    7,396,648Period 9
Jan 14-Feb 10, 2007
    
    
    2
    
    
    $
    5.78
    
    
    
    2
    
    
    
    7,396,646Period 10 
Feb 11-March 10, 2007
    
    
    8
    
    
    $
    3.31
    
    
    
    8
    
    
    
    7,396,638Period 11
March 11-April 7, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,638Period 12
April 8-May 5, 2007
    
    
    3
    
    
    $
    3.75
    
    
    
    3
    
    
    
    7,396,635Period 13 
May 6-June 2, 2007
    
    
    4
    
    
    $
    3.50
    
    
    
    4
    
    
    
    7,396,631Total
    
    
    57
    
    
    $
    4.49
    
    
    
    57
    
    
    
    7,396,631
 
 (A)
    
    Since May 11, 1999, our Board has authorized the purchase of
approximately 11.0 million shares of our common stock. Prior to
the Chapter 11 filing, management had the discretion to determine
the number of the shares to be purchased, as well as the timing
of any such purchases, with the pricing of any shares repurchased
to be at prevailing market prices. As of June 2, 2007, 7,396,631
shares of our common stock were available to be purchased under
this stock repurchase program. As a result of our Chapter 11
filing and restrictions imposed by the DIP Facility, however, the
program has effectively been suspended since the filing.(B)
    
    Repurchases resulted 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. In
connection with the conversion of $1,000 of our 6% senior
subordinated convertible notes, a fractional share was
repurchased. 28




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##### 



ITEM 6. SELECTED FINANCIAL DATA
 INTERSTATE BAKERIES CORPORATION
FIVE-YEAR SUMMARY OF FINANCIAL DATA
 Fifty-Two
    
    
    Fifty-Three
    
    
    
    
    
    
    Fifty-TwoWeeks Ended
    
    
    Weeks Ended
    
    
    
    
    
    
    Weeks EndedJune 2,
    
    
    June 3,
    
    
    May 28,
    
    
    May 29,
    
    
    May 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(1)
    
    
    (4)
    
    
    (6) (7)
    
    
    (8)
    
    
    (9)(dollars and shares in thousands, except per share data)Statements of OperationsNet sales
    
    $
    2,917,268
    
    
    $
    3,060,473
    
    
    $
    3,403,505
    
    
    $
    3,467,562
    
    
    $
    3,525,780Cost of products sold (exclusive of depreciation
and amortization) (2)
    
    
    1,489,019
    
    
    
    1,552,731
    
    
    
    1,724,054
    
    
    
    1,733,303
    
    
    
    1,739,746Operating income (loss)
    
    
    (39,641
    )
    
    
    (56,368
    )
    
    
    (335,536
    )
    
    
    (18,326
    )
    
    
    70,276% of net sales
    
    
    (1.4
    )%
    
    
    (1.8
    )%
    
    
    (9.8
    )%
    
    
    (0.5
    )%
    
    
    2.0
    %Income (loss) before cumulative effect of
accounting change
    
    $
    (112,848
    )
    
    $
    (127,300
    )
    
    $
    (379,280
    )
    
    $
    (33,370
    )
    
    $
    18,727Cumulative effect of accounting change (5)
    
    
    
    
    
    
    (1,017
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (112,848
    )
    
    $
    (128,317
    )
    
    $
    (379,280
    )
    
    $
    (33,370
    )
    
    $
    18,727% of net sales
    
    
    (3.9
    )%
    
    
    (4.2
    )%
    
    
    (11.1
    )%
    
    
    (1.0
    )%
    
    
    0.5
    %Earnings (loss) per share before cumulative
effect of accounting change:Basic
    
    $
    (2.50
    )
    
    $
    (2.82
    )
    
    $
    (8.43
    )
    
    $
    (0.74
    )
    
    $
    0.42Diluted
    
    
    (2.50
    )
    
    
    (2.82
    )
    
    
    (8.43
    )
    
    
    (0.74
    )
    
    
    0.41Common stock dividends per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.21
    
    
    
    0.28Weighted average common shares outstanding:Basic
    
    
    45,171
    
    
    
    45,124
    
    
    
    45,010
    
    
    
    44,868
    
    
    
    44,599Diluted
    
    
    45,171
    
    
    
    45,124
    
    
    
    45,010
    
    
    
    44,868
    
    
    
    45,185Balance SheetsTotal assets
    
    $
    1,081,392
    
    
    $
    1,253,055
    
    
    $
    1,398,650
    
    
    $
    1,673,797
    
    
    $
    1,697,349Long-term debt, excluding current maturities (10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,362
    
    
    
    536,788Stockholders equity (deficit) (3)
    
    
    (318,741
    )
    
    
    (240,583
    )
    
    
    (116,924
    )
    
    
    261,708
    
    
    
    290,430
 
 (1)
    
    Fiscal 2007 operating loss includes net restructuring credits of approximately $4.1 million relating to gains realized on the sale of the
restructuring related assets partially offset by costs related to certain closings and restructurings of bakeries, depots and bakery
outlets; and a machinery and equipment impairment of approximately $1.4 million.(2)
    
    Depreciation and amortization excluded from cost of products sold amounted to approximately $51.0 million, $59.7 million, $70.2 million,
$71.6 million, and $72.7 million in fiscal 2007, 2006, 2005, 2004, and 2003, respectively.(3)
    
    Fiscal 2007 stockholders deficit reflects a reduction of approximately $33.4 million related to a change in accounting for pension and
other postretirement obligations due to our adoption of the recognition and disclosure requirements of Statement of Accounting Standards No.
158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.(4)
    
    Fiscal 2006 operating loss includes net restructuring credits of approximately $27.2 million relating to gains realized on the sale of the
restructuring related assets partially offset by costs related to certain closings and restructurings of bakeries, depots and bakery
outlets; and a machinery and equipment impairment of approximately $4.8 million.(5)
    
    In fiscal 2006, as a result of adopting FIN 47, we recorded a
cumulative effect of an accounting change of approximately
$1.0 million, or $0.02
per share, and a liability of the same amount as the related asset values were fully depreciated as of June 3, 2006.(6)
    
    Fiscal 2005 operating loss includes goodwill and other intangible asset impairments of approximately $229.5 million; restructuring charges
of approximately $54.3 million relating to the closures of five bakeries, a general workforce reduction and other cost reductions;
settlement of class 29




---



##### 



action litigation of approximately $8.7 million; and a net curtailment loss from the suspension of our Supplemental
Employee Retirement Plan of $10.3 million.(7)
    
    Fiscal 2005 net loss includes a tax valuation allowance adjustment of $5.6 million related to deferred tax assets originating in prior years.(8)
    
    Fiscal 2004 operating loss includes restructuring charges of approximately $12.1 million 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.(9)
    
    Fiscal 2003 operating income includes restructuring charges of approximately $9.9 million relating to certain closings and restructurings of
bakeries and bakery outlets and other charges of approximately $3.6 million relating to the common stock award made on October 1, 2002 to
IBCs retiring Chief Executive Officer.(10)
    
    In fiscal 2007, 2006, 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
       30




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##### 



RECENT DEVELOPMENTS
    OVERVIEW OF CERTAIN TRENDS AND EVENTS AFFECTING OPERATIONS, FINANCIAL POSITION AND LIQUIDITY
    31




---



##### 



32




---



##### 



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   33




---



##### 



Reserves for Self-Insurance and Postretirement Benefits
   Pension Obligations
   Long-lived Assets
    34




---



##### 



Restructuring (Credits) Charges
   Income Taxes
  Legal Reserves
  Environmental Liabilities
  35




---



##### 



Liabilities Subject to Compromise
  Reorganization Charges
  NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
  RESULTS OF OPERATIONS
  Fifty-Two
    
    Fifty-Three
    
    Fifty-TwoWeeks Ended
    
    Weeks Ended
    
    Weeks EndedJune 2,
    
    June 3,
    
    May 28,2007
    
    2006
    
    2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of products sold (exclusive of items shown below)
    
    
    51.0
    
    
    
    50.7
    
    
    
    50.7Selling, delivery and administrative expenses
    
    
    47.7
    
    
    
    49.1
    
    
    
    47.9Restructuring (credits) charges
    
    
    (0.1
    )
    
    
    (0.9
    )
    
    
    1.6Depreciation and amortization
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.6Loss on sale or abandonment of assets
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.3Property and equipment impairment
    
    
    
    
    
    
    0.2
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    6.3Other intangible assets impairment
    
    
    
    
    
    
    
    
    
    
    0.4Operating loss
    
    
    (1.4
    )
    
    
    (1.8
    )
    
    
    (9.8
    )Interest expense
    
    
    1.7
    
    
    
    1.7
    
    
    
    1.2Reorganization charges
    
    
    1.1
    
    
    
    1.2
    
    
    
    1.2Other income
    
    
    
    
    
    
    
    
    
    
    Loss before income taxes and cumulative effect of accounting change
    
    
    (4.2
    )
    
    
    (4.7
    )
    
    
    (12.2
    )Provision (benefit) for income taxes
    
    
    (0.3
    )
    
    
    (0.5
    )
    
    
    (1.1
    )Loss before cumulative effect of accounting change
    
    
    (3.9
    )
    
    
    (4.2
    )
    
    
    (11.1
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (3.9
    )%
    
    
    (4.2
    )%
    
    
    (11.1
    )%
 36




---



##### 



Fiscal 2007 Compared to Fiscal 2006
 Net Sales
(dollars in thousands)
 Fifty-Two Weeks Ended
    
    
    Fifty-Three Weeks Ended
    
    
    %June 2, 2007
    
    
    June 3, 2006
    
    
    Increase /Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    (Decrease)Wholesale operations
    
    $
    2,594,408
    
    
    
    88.9
    %
    
    $
    2,701,751
    
    
    
    88.3
    %
    
    
    (4.0
    )%Retail operations
    
    
    322,860
    
    
    
    11.1
    
    
    
    358,722
    
    
    
    11.7
    
    
    
    (10.0
    )Total net sales
    
    $
    2,917,268
    
    
    
    100.0
    %
    
    $
    3,060,473
    
    
    
    100.0
    %
    
    
    (4.7
    )%
 Consolidated Net Sales
  Wholesale operations net sales. rd
 Retail operations net sales. rd
 Gross Profit (Exclusive of Depreciation and Amortization)
  Selling, Delivery and Administrative Expenses
  37




---



##### 



Restructuring Charges
   Property and Equipment Impairment
  Operating Loss
(dollars in thousands)
 Fifty-Two Weeks Ended
    
    
    Fifty-Three Weeks Ended
    
    
    %June 2, 2007
    
    
    June 3, 2006
    
    
    Increase /Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    (Decrease)Wholesale operations
    
    $
    32,393
    
    
    
    (81.7
    )%
    
    $
    (7,353
    )
    
    
    13.0
    %
    
    
    540.5
    %Retail operations
    
    
    10,902
    
    
    
    (27.5
    )
    
    
    10,682
    
    
    
    (18.9
    )
    
    
    2.143,295
    
    
    
    (109.2
    )
    
    
    3,329
    
    
    
    (5.9
    )
    
    
    1,200.5Corporate
    
    
    (82,936
    )
    
    
    209.2
    
    
    
    (59,697
    )
    
    
    105.9
    
    
    
    (38.9
    )Total operating loss
    
    $
    (39,641
    )
    
    
    100.0
    %
    
    $
    (56,368
    )
    
    
    100.0
    %
    
    
    29.7
 Consolidated Operating Loss
  Wholesale operating income
 Retail operating income.
 38




---



##### 



Reorganization Charges
   Interest Expense
  Provision (Benefit) for Income Taxes
  Fiscal 2006 Compared to Fiscal 2005
 Net Sales
(dollars in thousands)
 Fifty-Three Weeks Ended
    
    
    Fifty-Two Weeks Ended
    
    
    
    %June 3, 2006
    
    
    May 28, 2005
    
    
    Increase /Amount
    
    
    %
    
    
    Amount
    
    
    %
    

    

    (Decrease)Wholesale operations
    
    $
    2,701,751
    
    
    
    88.3
    %
    
    $
    2,995,481
    
    
    
    88.0
    %
    
    
    (9.8
    )%Retail operations
    
    
    358,722
    
    
    
    11.7
    
    
    
    408,024
    
    
    
    12.0
    
    
    
    (12.1
    )Total net sales
    
    $
    3,060,473
    
    
    
    100.0
    %
    
    $
    3,403,505
    
    
    
    100.0
    %
    
    
    (10.1
    )%
 39




---



##### 



Consolidated Net Sales
  Wholesale operations net sales. rd
 Retail operations net sales. rd
 Gross Profit (Exclusive of Depreciation and Amortization)
  Selling, Delivery and Administrative Expenses
  Restructuring Charges
  40




---



##### 



Property and Equipment Impairment
  Other Intangible Assets Impairment
  Operating Loss
(dollars in thousands)
 Fifty-Three Weeks Ended
    
    
    Fifty-Two Weeks Ended
    
    
    %June 3, 2006
    
    
    May 28, 2005
    
    
    Increase /Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    (Decrease)Wholesale operations
    
    $
    (7,353
    )
    
    
    13.0
    %
    
    $
    43,874
    
    
    
    (13.1
    )%
    
    
    (116.8
    )%Retail operations
    
    
    10,682
    
    
    
    (18.9
    )
    
    
    7,264
    
    
    
    (2.1
    )
    
    
    47.13,329
    
    
    
    (5.9
    )
    
    
    51,138
    
    
    
    (15.2
    )
    
    
    (93.5
    )Corporate
    
    
    (59,697
    )
    
    
    105.9
    
    
    
    (386,674
    )
    
    
    115.2
    
    
    
    84.6Total operating loss
    
    $
    (56,368
    )
    
    
    100.0
    %
    
    $
    (335,536
    )
    
    
    100.0
    %
    
    
    83.2
 Consolidated Operating Loss
  Wholesale operating loss .
 Retail operating income.
 41




---



##### 



Reorganization Charges
   Interest Expense
  Provision (Benefit) for Income Taxes
  CASH RESOURCES AND LIQUIDITY
 CASH FLOWS
  Cash From (Used In) Operating Activities
  42




---



##### 



Cash From (Used In) Investing Activities
  Cash From (Used In) Financing Activities
  SOURCES OF LIQUIDITY AND CAPITAL
     Voluntary Chapter 11 Bankruptcy Filing
  43




---



##### 



44




---



##### 



45




---



##### 



Contractual Obligations
  Payments Due By Fiscal Year Under Certain Contractual Obligations (a) (h) (i)(dollars in thousands)UnconditionalSenior
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    PurchaseFiscal Years
    
    
    
    
    
    DIP
    
    
    Secured
    
    
    Subordinated
    
    
    Capital
    
    
    Other
    
    
    Operating
    
    
    ObligationsEnding
    
    Total
    
    
    Facility (b)
    
    
    Credit Facility (c)
    
    
    Notes (d)
    
    
    Leases
    
    
    Debt (e)
    
    
    Leases (f)
    
    
    (g)2008
    
    $
    671,864
    
    
    $
    
    
    
    $
    447,757
    
    
    $
    99,999
    
    
    $
    3,758
    
    
    $
    6,125
    
    
    $
    22,360
    
    
    $
    91,8652009
    
    
    12,168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,736
    
    
    
    4322010
    
    
    4,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,893
    
    
    
    1062011
    
    
    2,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,641
    
    
    
    2012
    
    
    1,483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    Thereafter
    
    
    1,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,530
    
    
    
    Total
    
    $
    694,685
    
    
    $
    
    
    
    $
    447,757
    
    
    $
    99,999
    
    
    $
    3,758
    
    
    $
    6,125
    
    
    $
    44,643
    
    
    $
    92,403
 
 (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 revolving line of credit through February 9, 2008,
which is secured by a superpriority lien in favor of the lenders
over virtually all of our assets. 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 $109.7 million
was utilized at June 2, 2007. As of June 2, 2007, there were no
borrowings outstanding under the revolving credit facility and we
had $90.3 million available under the DIP Facility (of which up to
$40.3 million could be used for additional letters of credit).(c)
    
    Borrowings under our 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 $175.1 million of which $101.5
million was utilized to support the issuance of letters of credit
and $73.6 million was borrowed. At June 2, 2007, there was no
availability under the revolving credit line for additional
borrowings or letters of credit. At June 2, 2007, we also had an
aggregate $374.1 million borrowed under the Tranche A, B, and C
term loans provided under the Senior Secured Credit Facility. We
have presented this facility in our June 2, 2007 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.
In July 2006, a principal amount of $1,000 was converted to 98
shares of our common stock. As these notes are unsecured, they
are included in liabilities subject to compromise and the accrual
of interest has been suspended. See Note 7. Debt and Note 10.
Liabilities Subject to Compromise to the accompanying consolidated
financial statements.(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. In March 2006, the bankruptcy court approved a
motion to transfer from the lessor to us all right, title and
interest in this leased equipment for general unsecured debt.
This debt is included in liabilities subject to compromise. See
Note 7. Debt and Note 10. Liabilities Subject to Compromise to the
accompanying consolidated financial statements.(f)
    
    At June 2, 2007, 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. FIN No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees Including
Indirect Guarantees of Indebtedness of Others, on its effective
date required 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 June 2, 2007, the maximum
potential liability for all guaranteed 46




---



##### 



lease residual values was
$5.9 million including amounts guaranteed prior and subsequent to
the effective date of $2.4 million and $3.5 million, respectively.
At June 2, 2007, 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 $0.1 million.(g)
    
    The unconditional purchase obligations represent obligations as of
June 2, 2007. This includes items such as ingredients, packaging,
third party agreements to perform certain functions and other
obligations. The unconditional purchase obligations as compared
to prior years have been reduced to reflect six month cancellation
agreements under three contracts with a service provider. Future
periods now reflect six months of service fees and any amounts
required for early termination of the related contracts.(h)
    
    We have not included estimated interest payments as a component of
this contractual obligations table since interest on the senior
secured credit facility is dependent upon the timing of emergence
from bankruptcy, as well as the ultimate treatment of this type of
obligation under any reorganization plan. See Note (d) above for
a discussion of interest obligations related to the 6.0% Senior
Subordinated Convertible Notes.(i)
    
    See Note 11. Employee Benefit Plans to the accompanying
consolidated financial statements for a discussion of our pension
and other postretirement obligations. OFF-BALANCE SHEET FINANCING
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Commodity Prices
  47




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 INDEX TO FINANCIAL STATEMENTS
 PageNumberReport of Independent Registered Public Accounting Firm
    
    
    49Consolidated Balance Sheets at June 2, 2007 and June 3, 2006
    
    
    51Consolidated Statements of Operations for the 52 weeks ended June 2, 2007, 53 weeks ended June 3, 2006, and 52 weeks ended May 28, 2005
    
    
    52Consolidated Statements of Cash Flows for the 52 weeks ended June 2, 2007, 53 weeks ended June 3, 2006, and 52 weeks ended May 28, 2005
    
    
    53Consolidated Statements of Stockholders Equity (Deficit) for the 52 weeks ended June 2, 2007, 53 weeks ended June 3, 2006, and 52 weeks ended May 28, 2005
    
    
    55Notes to Consolidated Financial Statements
    
    
    561. Voluntary Chapter 11 Filing
    
    
    562. Description of Business and Significant Accounting Policies
    
    
    583. Property and Equipment
    
    
    674. Assets Held for Sale
    
    
    675. Lease Obligations
    
    
    686. Other Intangible Assets
    
    
    687. Debt
    
    
    698. Accrued Expenses and Other Liabilities
    
    
    729. Derivative Instruments
    
    
    7210. Liabilities Subject to Compromise
    
    
    7311. Employee Benefit Plans
    
    
    7412. Key Employee Retention Plan
    
    
    8213. Stock-Based Compensation
    
    
    8214. Restructuring (Credits) Charges
    
    
    8515. Reorganization Charges
    
    
    8916. Income Taxes
    
    
    9017. Commitments and Contingencies
    
    
    9118. Stock Repurchases
    
    
    9519. Stockholder Rights Plan
    
    
    9520. Earnings (Loss) per Share
    
    
    9621. Comprehensive Loss
    
    
    9722. Segment Information
    
    
    9723. Quarterly Financial Information (Unaudited)
    
    
    99
 48




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) Accounting for Conditional Asset Retirement Obligations  an
interpretation of FASB Statement No. 143
 49




---



##### 



50




---



##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED BALANCE SHEETS
 (dollars in thousands, except share data)
 June 2,
    
    
    June 3,2007
    
    
    2006ASSETSCurrent assetsCash
    
    $
    67,212
    
    
    $
    78,178Restricted cash
    
    
    15,085
    
    
    
    86,353Accounts receivable, less allowance for doubtful accounts of $2,315 and $3,400, respectively
    
    
    152,175
    
    
    
    150,507Inventories
    
    
    65,682
    
    
    
    65,431Assets held for sale
    
    
    2,032
    
    
    
    11,931Other current assets
    
    
    49,649
    
    
    
    67,637Total current assets
    
    
    351,835
    
    
    
    460,037Property and equipment, net
    
    
    541,725
    
    
    
    601,101Other intangible assets
    
    
    160,239
    
    
    
    161,128Other assets
    
    
    27,593
    
    
    
    30,789Total assets
    
    $
    1,081,392
    
    
    $
    1,253,055LIABILITIES AND STOCKHOLDERS DEFICITLiabilities not subject to compromiseCurrent liabilitiesLong-term debt
    
    $
    451,515
    
    
    $
    494,882Accounts payable
    
    
    129,137
    
    
    
    117,044Accrued expenses
    
    
    217,373
    
    
    
    244,166Total current liabilities
    
    
    798,025
    
    
    
    856,092Other liabilities
    
    
    236,766
    
    
    
    272,647Deferred income taxes
    
    
    74,789
    
    
    
    77,819Total liabilities not subject to compromise
    
    
    1,109,580
    
    
    
    1,206,558Liabilities subject to compromise
    
    
    290,553
    
    
    
    287,080Stockholders deficitPreferred 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, 
45,249,000 and 45,295,000 shares outstanding, respectively
    
    
    816
    
    
    
    816Additional paid-in capital
    
    
    584,503
    
    
    
    585,631Accumulated deficit
    
    
    (255,559
    )
    
    
    (142,711
    )Treasury stock, 36,330,000 and 36,284,000 shares at cost, respectively
    
    
    (678,721
    )
    
    
    (678,572
    )Unearned restricted stock compensation
    
    
    
    
    
    
    (1,869
    )Accumulated other comprehensive income (loss)
    
    
    30,220
    
    
    
    (3,878
    )Total stockholders deficit
    
    
    (318,741
    )
    
    
    (240,583
    )Total liabilities and stockholders deficit
    
    $
    1,081,392
    
    
    $
    1,253,055
  51




---



##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollars in thousands, except per share data)
 Fifty-Two
    
    
    Fifty-Three
    
    
    Fifty-TwoWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedJune 2,
    
    
    June 3,
    
    
    May 28,2007
    
    
    2006
    
    
    2005Net sales
    
    $
    2,917,268
    
    
    $
    3,060,473
    
    
    $
    3,403,505Cost of products sold (exclusive of items shown below)
    
    
    1,489,019
    
    
    
    1,552,731
    
    
    
    1,724,054Selling, delivery and administrative expenses
    
    
    1,391,388
    
    
    
    1,504,038
    
    
    
    1,630,921Restructuring (credits) charges
    
    
    (4,073
    )
    
    
    (27,187
    )
    
    
    54,293Depreciation and amortization
    
    
    71,949
    
    
    
    77,795
    
    
    
    89,486Loss on sale or abandonment of assets
    
    
    7,266
    
    
    
    4,671
    
    
    
    10,744Property and equipment impairment
    
    
    1,360
    
    
    
    4,793
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    215,346Other intangible assets impairment
    
    
    
    
    
    
    
    
    
    
    14,1972,956,909
    
    
    
    3,116,841
    
    
    
    3,739,041Operating loss
    
    
    (39,641
    )
    
    
    (56,368
    )
    
    
    (335,536
    )Other (income) expenseInterest expense (excluding unrecorded contractual interest expense
of $5,983, $6,033, and $4,150, respectively)
    
    
    49,591
    
    
    
    52,504
    
    
    
    41,430Reorganization charges, net
    
    
    32,625
    
    
    
    37,015
    
    
    
    39,206Other income
    
    
    (1,132
    )
    
    
    (2,994
    )
    
    
    (353
    )81,084
    
    
    
    86,525
    
    
    
    80,283Loss before income taxes and cumulative effect of accounting change
    
    
    (120,725
    )
    
    
    (142,893
    )
    
    
    (415,819
    )Provision (benefit) for income taxes
    
    
    (7,877
    )
    
    
    (15,593
    )
    
    
    (36,539
    )Loss before cumulative effect of accounting change
    
    
    (112,848
    )
    
    
    (127,300
    )
    
    
    (379,280
    )Cumulative effect of accounting change, net of income taxes of $0 (See Note 2)
    
    
    
    
    
    
    (1,017
    )
    
    
    Net loss
    
    $
    (112,848
    )
    
    $
    (128,317
    )
    
    $
    (379,280
    )Basic and diluted loss per shareLoss before cumulative effect of accounting change
    
    $
    (2.50
    )
    
    $
    (2.82
    )
    
    $
    (8.43
    )Cumulative effect of accounting change
    
    
    
    
    
    
    (0.02
    )
    
    
    Total
    
    $
    (2.50
    )
    
    $
    (2.84
    )
    
    $
    (8.43
    )
  52




---



##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollars in thousands)
 Fifty-Two
    
    
    Fifty-Three
    
    
    Fifty-TwoWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedJune 2,
    
    
    June 3,
    
    
    May 28,2007
    
    
    2006
    
    
    2005Operating activitiesNet loss
    
    $
    (112,848
    )
    
    $
    (128,317
    )
    
    $
    (379,280
    )Depreciation and amortization
    
    
    71,949
    
    
    
    77,795
    
    
    
    89,486Provision (benefit) for deferred income taxes
    
    
    (841
    )
    
    
    (1,681
    )
    
    
    7,750Reorganization charges, net
    
    
    32,625
    
    
    
    37,015
    
    
    
    39,206Cash reorganization items
    
    
    (36,092
    )
    
    
    (35,384
    )
    
    
    (26,473
    )Non-cash bankruptcy-related (credits) charges
    
    
    1,512
    
    
    
    (713
    )
    
    
    Non-cash interest expense  deferred debt fees
    
    
    3,167
    
    
    
    6,724
    
    
    
    5,616Non-cash interest on swap agreements
    
    
    
    
    
    
    
    
    
    
    (655
    )Non-cash restricted stock and deferred share compensation expense
    
    
    341
    
    
    
    944
    
    
    
    1,762Non-cash cumulative effect of accounting change
    
    
    
    
    
    
    1,017
    
    
    
    (Gain) loss on sale, write-down or abandonment of assets
    
    
    2,199
    
    
    
    (30,473
    )
    
    
    34,302Write-off of goodwill and other intangibles
    
    
    
    
    
    
    
    
    
    
    242,410Write-down of software assets
    
    
    
    
    
    
    
    
    
    
    4,424Write-off prior service cost asset
    
    
    
    
    
    
    
    
    
    
    12,384Change in operating assets and liabilitiesAccounts receivable
    
    
    (1,035
    )
    
    
    26,274
    
    
    
    5,279Inventories
    
    
    (251
    )
    
    
    4,000
    
    
    
    2,470Other current assets
    
    
    13,215
    
    
    
    5,541
    
    
    
    (6,586
    )Accounts payable and accrued expenses
    
    
    (10,894
    )
    
    
    (22,313
    )
    
    
    51,490Long-term portion of self insurance reserves
    
    
    (721
    )
    
    
    15,591
    
    
    
    19,439Other
    
    
    5,958
    
    
    
    (13,743
    )
    
    
    13,332Net cash from (used in) operating activities
    
    
    (31,716
    )
    
    
    (57,723
    )
    
    
    116,356Investing activitiesPurchases of property and equipment
    
    
    (27,880
    )
    
    
    (32,328
    )
    
    
    (29,175
    )Proceeds from sale of assets
    
    
    25,143
    
    
    
    90,367
    
    
    
    4,156Restricted cash deposit
    
    
    (18,673
    )
    
    
    (85,458
    )
    
    
    Restricted cash release
    
    
    89,222
    
    
    
    
    
    
    
    Acquisition and development of software assets
    
    
    (2,244
    )
    
    
    
    
    
    
    (6,206
    )Other
    
    
    224
    
    
    
    56
    
    
    
    513Net cash from (used in) investing activities
    
    
    65,792
    
    
    
    (27,363
    )
    
    
    (30,712
    )Financing activitiesReduction of long-term debt
    
    
    (46,306
    )
    
    
    (1,067
    )
    
    
    (75,647
    )Increase in revolving credit facility
    
    
    3,298
    
    
    
    13,415
    
    
    
    11,902Issuance of convertible bonds
    
    
    
    
    
    
    
    
    
    
    100,000Stock option exercise proceeds
    
    
    
    
    
    
    101
    
    
    
    Acquisition of treasury stock
    
    
    
    
    
    
    (1
    )
    
    
    (192
    )Cash reorganization items
    
    
    
    
    
    
    
    
    
    
    (398
    )Debt fees
    
    
    (2,034
    )
    
    
    (742
    )
    
    
    (9,479
    )Net cash from (used in) financing activities
    
    
    (45,042
    )
    
    
    11,706
    
    
    
    26,186Net increase (decrease) in cash
    
    
    (10,966
    )
    
    
    (73,380
    )
    
    
    111,830Cash at the beginning of period
    
    
    78,178
    
    
    
    151,558
    
    
    
    39,728Cash at the end of period
    
    $
    67,212
    
    
    $
    78,178
    
    
    $
    151,558
 53




---



##### 



Fifty-Two
    
    
    Fifty-Three
    
    
    Fifty-TwoWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedJune 2,
    
    
    June 3,
    
    
    May 28,2007
    
    
    2006
    
    
    2005Cash payments (received)Interest
    
    $
    47,169
    
    
    $
    47,260
    
    
    $
    41,587Income taxes
    
    
    (14,094
    )
    
    
    (15,705
    )
    
    
    (41,506
    )Non-cash investing and financing activitiesIssuance of restricted stock
    
    
    
    
    
    
    
    
    
    
    221Accrued deferred share award liability settled through equity issuance
    
    
    
    
    
    
    
    
    
    
    1,371Equipment purchases financed with capital lease obligations
    
    
    
    
    
    
    
    
    
    
    409Long-term debt reduction from lease rejections
    
    
    359
    
    
    
    890
    
    
    
    1,560Asset disposals from lease rejections
    
    
    271
    
    
    
    705
    
    
    
    1,189Convertible note conversion
    
    
    1
    
    
    
    
    
    
    
    Interest earned on restricted cash
    
    
    774
    
    
    
    895
    
    
    
    
  54




---



##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 (dollars and shares in thousands, except per share data)
 Common
    
    
    
    
    
    
    Retained
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    Accumulated
    
    
    TotalStock Issued
    
    
    Additional
    
    
    Earnings
    
    
    Treasury Stock
    
    
    Restricted
    
    
    Other
    
    
    StockholdersNumber
    
    
    Par
    
    
    Paid-in
    
    
    (Accumulated
    
    
    Number of
    
    
    
    
    
    
    Stock
    
    
    Comprehensive
    
    
    Equityof Shares
    
    
    Value
    
    
    Capital
    
    
    Deficit)
    
    
    Shares
    
    
    Cost
    
    
    Compensation
    
    
    Income (Loss)
    
    
    (Deficit)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
surrenders 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
    )Comprehensive loss (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128,317
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,657
    
    
    
    (124,660
    )Stock options exercised
    
    
    
    
    
    
    
    
    
    
    (86
    )
    
    
    
    
    
    
    10
    
    
    
    187
    
    
    
    
    
    
    
    
    
    
    
    101Restricted share
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,486
    
    
    
    
    
    
    
    1,486Restricted share surrenders
    
    
    
    
    
    
    
    
    
    
    (372
    )
    
    
    
    
    
    
    (52
    )
    
    
    (379
    )
    
    
    166
    
    
    
    
    
    
    
    (585
    )Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Balance June 3, 2006
    
    
    81,579
    
    
    
    816
    
    
    
    585,631
    
    
    
    (142,711
    )
    
    
    (36,284
    )
    
    
    (678,572
    )
    
    
    (1,869
    )
    
    
    (3,878
    )
    
    
    (240,583
    )Comprehensive loss (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112,848
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    (112,198
    )Cumulative effect of
change in accounting for
pension and other
postretirement obligations
pursuant to SFAS No. 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,448
    
    
    
    33,448Reclassification due to
change in accounting for
stock-based compensation
pursuant to SFAS No. 123R
    
    
    
    
    
    
    
    
    
    
    (1,869
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,869
    
    
    
    
    
    
    
    Convertible note
conversion
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1Restricted share
compensation expense
    
    
    
    
    
    
    
    
    
    
    1,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,147Restricted share surrenders
    
    
    
    
    
    
    
    
    
    
    (405
    )
    
    
    
    
    
    
    (46
    )
    
    
    (151
    )
    
    
    
    
    
    
    
    
    
    
    (556
    )Balance June 2, 2007
    
    
    81,579
    
    
    $
    816
    
    
    $
    584,503
    
    
    $
    (255,559
    )
    
    
    (36,330
    )
    
    $
    (678,721
    )
    
    $
    
    
    
    $
    30,220
    
    
    $
    (318,741
    )
 
 (a)
    
    See Note 21. Comprehensive Loss to these consolidated financial statements for the
reconciliations of net loss to comprehensive income (loss).  55




---



##### 



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.
   56




---



##### 



57




---



##### 



Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
 
 2. Description of Business and Significant Accounting Policies
 Description of Business
  Fiscal Year End
  Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  58




---



##### 



Inventories
   June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)Ingredients and packaging
    
    $
    43,279
    
    
    $
    44,540Finished goods
    
    
    22,403
    
    
    
    20,891$
    65,682
    
    
    $
    65,431
 Property and Equipment
  Assets Held for Sale
  Lease Obligations
 Accounting for Leases
 Software Costs
   59




---



##### 



Other Intangible Assets
    Impairment of Long-Lived Assets
  Environmental Liabilities
   Asset Retirement Obligations
 Accounting for Conditional Asset Retirement Obligations  an interpretation of FASB Statement No.
143 Accounting for Asset
Retirement Obligations
  60




---



##### 



(dollars in thousands)Balance June 3, 2006
    
    $
    1,320Obligations settled
    
    
    (426
    )Accretion expense and adjustments
    
    
    119Balance June 2, 2007
    
    $
    1,013
 Liabilities Subject to Compromise
  Pension Obligations
  Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans
 61




---



##### 



Reserves for Self-Insurance and Postretirement Benefits
  Derivative Instruments
 Accounting for Derivative Instruments and
Hedging Activities
 Accumulated Other Comprehensive Income (Loss)
  Revenue Recognition
  Sales Incentives
  62




---



##### 



Consideration Given to a Customer
  Cost of Products Sold
  Advertising and Promotion Costs
  Shipping and Handling Costs
  Restructuring (Credits) Charges
   Reorganization Charges
  Income Taxes
  63




---



##### 



Stock-Based Compensation
 Share-Based
Payment Accounting for Stock-Based Compensation, Accounting for Stock
Issued to Employees
   Earnings per Share
  Related Party Transactions
   64




---



##### 



Contingencies
 Accounting for Contingencies
 Newly Adopted Accounting Pronouncements
 Accounting
Changes and Error Corrections Accounting Changes Reporting Accounting Changes in Interim
Financial Statements
  Inventory Costs  An Amendment of ARB No. 43,
Chapter 4 .
 65




---



##### 



Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans
  Quantifying Financial Misstatements
 How Taxes
Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the
Income Statement (That Is, Gross versus Net Presentation)
 Recently Issued Accounting Pronouncements
 The Fair Value Option for Financial Assets and
Liabilities
 Fair Value Measurements
 66




---



##### 



Accounting for Uncertainty in
Income Taxes  an interpretation of FASB Statement No. 109
 
 3. Property and Equipment
  June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)Land and buildings (lives ranging from 10 to 35 years)
    
    $
    390,147
    
    
    $
    390,573Machinery and equipment (lives ranging from 4 to 15 years)
    
    
    865,398
    
    
    
    931,4081,255,545
    
    
    
    1,321,981Less accumulated depreciation
    
    
    (713,820
    )
    
    
    (720,880
    )$
    541,725
    
    
    $
    601,101
    
 4. Assets Held for Sale
   67




---



##### 



5. Lease Obligations
  Fiscal Years Ending
    
    Capital Leases
    
    
    Operating Leases(dollars in thousands)2008
    
    $
    1,219
    
    
    $
    22,3602009
    
    
    967
    
    
    
    11,7362010
    
    
    825
    
    
    
    4,8932011
    
    
    663
    
    
    
    2,6412012
    
    
    478
    
    
    
    1,483Thereafter
    
    
    768
    
    
    
    1,530Total minimum lease payments
    
    
    4,920
    
    
    $
    44,643Amounts representing interest
    
    
    (1,162
    )Present value of minimum lease payments
    
    
    3,758Less: Capital lease obligations, short-term
    
    
    (3,758
    )Capital lease obligations, long-term
    
    $
    
  Guarantors Accounting
and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others
  
 6. Other Intangible Assets
  Goodwill and Other Intangible
Assets
  68




---



##### 



June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)Intangible assets with indefinite lives(generally trademarks and trade names)Gross carrying amount
    
    $
    157,471
    
    
    $
    157,471Intangible assets with finite livesGross carrying amount
    
    $
    13,854
    
    
    $
    13,854Less:Accumulated amortization
    
    
    (11,086
    )
    
    
    (10,197
    )Net carrying amount
    
    $
    2,768
    
    
    $
    3,657
  
 7. Debt
  June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)SecuredPost-petition credit agreement
    
    $
    
    
    
    $
    Senior secured credit facility  pre-petition
    
    
    447,757
    
    
    
    489,817Unsecured6% senior subordinated convertible notes  pre-petition
    
    
    99,999
    
    
    
    100,000Capital lease converted to pre-petition debt
    
    
    6,125
    
    
    
    6,125Capital leasesReal estate
    
    
    3,758
    
    
    
    5,065557,639
    
    
    
    601,007Less:Current portion
    
    
    (451,515
    )
    
    
    (494,882
    )Pre-filing date claims included in liabilities subject to compromise
    
    
    (106,124
    )
    
    
    (106,125
    )Long-term debt
    
    $
    
    
    
    $
    
 69




---



##### 



Post-Petition Credit Agreement
    Senior Secured Credit Facility
  70




---



##### 



6% Senior Subordinated Convertible Notes
  Other Matters
  Financial Reporting by
Entities in Reorganization under the Bankruptcy Code
  .
 71




---



##### 



8. Accrued Expenses and Other Liabilities
  June 2,
    
    June 3,2007
    
    2006(dollars in thousands)Self-insurance reserves
    
    $
    76,500
    
    
    $
    74,882Payroll, vacation and other compensation
    
    
    68,760
    
    
    
    66,560Current portion of obligations under
pension and postretirement plans (See Note 11. Employee Benefit Plans)
    
    
    40,166
    
    
    
    43,245Taxes other than income
    
    
    14,495
    
    
    
    25,509
   June 2,
    
    June 3,2007
    
    2006(dollars in thousands)Self-insurance reserves
    
    $
    128,487
    
    
    $
    131,421Obligations under pension, postretirement and SERP
plans (See Note 11. Employee Benefit Plans)
    
    
    94,893
    
    
    
    126,477
 
 9. Derivative Instruments
       72




---



##### 



10. Liabilities Subject to Compromise
     June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)Accounts payable
    
    $
    130,732
    
    
    $
    129,951Taxes payable
    
    
    5,741
    
    
    
    7,966Retirement obligations (SERP and deferred compensation)
    
    
    15,063
    
    
    
    14,598Legal reserve
    
    
    13,819
    
    
    
    12,910Interest bearing debt and capital leases
    
    
    106,124
    
    
    
    106,125Other
    
    
    19,074
    
    
    
    15,530$
    290,553
    
    
    $
    287,080
   73




---



##### 



11. Employee Benefit Plans
 Adoption of SFAS 158
   Before
    
    
    
    
    
    AfterApplication
    
    SFAS 158
    
    Applicationof SFAS 158
    
    Adjustments
    
    of SFAS 158(dollars in thousands)AssetsOther assets
    
    $
    29,307
    
    
    $
    (1,714
    )
    
    $
    27,593Total assets
    
    
    1,083,106
    
    
    
    (1,714
    )
    
    
    1,081,392LiabilitiesOther liabilities
    
    
    271,928
    
    
    
    (35,162
    )
    
    
    236,766Total liabilities not subject to compromise
    
    
    1,144,742
    
    
    
    (35,162
    )
    
    
    1,109,580Stockholders deficitAccumulated other comprehensive income (loss)
    
    
    (3,228
    )
    
    
    33,448
    
    
    
    30,220Total stockholders deficit
    
    
    (352,189
    )
    
    
    33,448
    
    
    
    (318,741
    )
 American Bakers Association Retirement Plan
    74




---



##### 



June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)Change in Benefit ObligationBenefit obligation at beginning of year
    
    $
    55,543
    
    
    $
    59,806Service cost
    
    
    1,131
    
    
    
    1,579Interest cost
    
    
    3,364
    
    
    
    3,208Actuarial (gain) loss
    
    
    4,251
    
    
    
    (4,469
    )Benefits paid and expenses
    
    
    (3,824
    )
    
    
    (3,405
    )Curtailment gain
    
    
    
    
    
    
    (1,176
    )Benefit obligation at end of year
    
    $
    60,465
    
    
    $
    55,543Change in Fair Value of Negative Plan AssetsFair value of plan assets at beginning of year
    
    $
    (2,750
    )
    
    $
    (2,444
    )Actual return on plan assets
    
    
    (1,586
    )
    
    
    838Employer contributions
    
    
    445
    
    
    
    2,261Benefits paid and expenses
    
    
    (3,824
    )
    
    
    (3,405
    )Fair value of negative plan assets at end of year
    
    $
    (7,715
    )
    
    $
    (2,750
    )Funded Status
    
    $
    (68,180
    )
    
    $
    (58,293
    )Amounts Recognized in the Balance SheetAccrued liabilities
    
    $
    (35,468
    )
    
    $
    (37,500
    )Other liabilities
    
    
    (32,712
    )
    
    
    (20,793
    )Net amount recognized
    
    $
    (68,180
    )
    
    $
    (58,293
    )Amounts Recognized in Accumulated Other Comprehensive Income (Loss)
    
    $
    
    
    
    $
    
 75




---



##### 



Fifty-Two
    
    
    
    
    
    Fifty-TwoWeeks
    
    Fifty-Three
    
    WeeksEnded
    
    Weeks Ended
    
    EndedJune 2,
    
    June 3,
    
    May 28,2007
    
    2006
    
    2005Weighted-average actuarial assumptionsLiability discount rate
    
    
    6.1
    %
    
    
    6.3
    %
    
    
    5.5
    %Expense discount rate (immediate recognition)
    
    
    6.1
    %
    
    
    6.3
    %
    
    
    5.5
    %Expected return on plan assets
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.5
    %Rate of compensation increase
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ACost of living
    
    
    3.0
    %
    
    
    3.0
    %
    
    
    3.0
    %
   Fifty-Two
    
    
    Fifty-Three
    
    
    Fifty-TwoWeeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    EndedJune 2,
    
    
    June 3,
    
    
    May 28,2007
    
    
    2006
    
    
    2005(dollars in thousands)Service cost
    
    $
    1,131
    
    
    $
    1,579
    
    
    $
    2,051Interest cost
    
    
    3,364
    
    
    
    3,208
    
    
    
    3,252Expected return on negative plan assets
    
    
    365
    
    
    
    248
    
    
    
    398Recognition ofPrior service cost
    
    
    
    
    
    
    
    
    
    
    423Actuarial (gain) loss
    
    
    5,473
    
    
    
    (5,555
    )
    
    
    7,708Total periodic pension (credit) cost
    
    
    10,333
    
    
    
    (520
    )
    
    
    13,832Curtailment gain
    
    
    
    
    
    
    (1,176
    )
    
    
    (2,641
    )Net pension (credit) expense
    
    $
    10,333
    
    
    $
    (1,696
    )
    
    $
    11,191
    Fiscal Years Ending
    
    (dollars in thousands)Benefit payments2008
    
    $
    3,7902009
    
    
    3,8332010
    
    
    3,8742011
    
    
    3,8932012
    
    
    3,9622013-2017
    
    
    20,419
 76




---



##### 



Defined Benefit Pension Plan, Postretirement Health and Life Plans, and Supplemental Executive
Retirement Plan
 Defined Benefit Pension Plan
  Postretirement Health and Life Plans
      Supplemental Executive Retirement Plan
   77




---



##### 



Selected Financial Information
  Pension
    
    
    Postretirement
    
    
    SERPJune 2,
    
    
    June 3,
    
    
    June 2,
    
    
    June 3,
    
    
    June 2,
    
    
    June 3,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(dollars in thousands)Change in Benefit ObligationBenefit obligation at beginning of year
    
    $
    70,490
    
    
    $
    68,722
    
    
    $
    58,345
    
    
    $
    63,213
    
    
    $
    23,822
    
    
    $
    22,573Service cost
    
    
    924
    
    
    
    904
    
    
    
    1,069
    
    
    
    1,444
    
    
    
    
    
    
    
    Interest cost
    
    
    3,968
    
    
    
    4,038
    
    
    
    3,374
    
    
    
    3,391
    
    
    
    1,370
    
    
    
    1,354Participant contributions
    
    
    55
    
    
    
    61
    
    
    
    1,776
    
    
    
    2,134
    
    
    
    
    
    
    
    Actuarial (gain) loss
    
    
    (1,723
    )
    
    
    1,812
    
    
    
    (3,929
    )
    
    
    (4,113
    )
    
    
    (2,129
    )
    
    
    (105
    )Benefits paid and expenses
    
    
    (4,790
    )
    
    
    (5,047
    )
    
    
    (6,394
    )
    
    
    (7,724
    )
    
    
    
    
    
    
    Benefit obligation at end of year
    
    $
    68,924
    
    
    $
    70,490
    
    
    $
    54,241
    
    
    $
    58,345
    
    
    $
    23,063
    
    
    $
    23,822Change in Fair Value of Plan AssetsFair value of plan assets at beginning of
year
    
    $
    65,971
    
    
    $
    59,174
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    7,024
    
    
    
    10,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    
    
    
    
    1,283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Participant contributions
    
    
    55
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid and expenses
    
    
    (4,790
    )
    
    
    (5,047
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value of plan assets at end of year
    
    $
    68,260
    
    
    $
    65,971
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reconciliation of Funded StatusFunded Status
    
    $
    (664
    )
    
    $
    (4,519
    )
    
    $
    (54,241
    )
    
    $
    (58,345
    )
    
    $
    (23,063
    )
    
    $
    (23,822
    )Unrecognized net actuarial (gain) loss
    
    
    
    
    
    
    7,335
    
    
    
    
    
    
    
    20,517
    
    
    
    
    
    
    
    (666
    )Unrecognized prior service cost
    
    
    
    
    
    
    1,990
    
    
    
    
    
    
    
    (55,872
    )
    
    
    
    
    
    
    Minimum liability adjustment
    
    
    
    
    
    
    (8,668
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net pension liability
    
    $
    (664
    )
    
    $
    (3,862
    )
    
    $
    (54,241
    )
    
    $
    (93,700
    )
    
    $
    (23,063
    )
    
    $
    (24,488
    )Amounts Recognized in the Balance SheetOther assets
    
    $
    
    
    
    $
    1,990
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Accrued liabilities
    
    
    
    
    
    
    
    
    
    
    (4,698
    )
    
    
    (5,745
    )
    
    
    
    
    
    
    Other liabilities
    
    
    (664
    )
    
    
    (3,862
    )
    
    
    (49,543
    )
    
    
    (87,955
    )
    
    
    (11,974
    )
    
    
    (13,867
    )Liabilities subject to compromise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,089
    )
    
    
    (10,621
    )Net amount recognized
    
    $
    (664
    )
    
    $
    (1,872
    )
    
    $
    (54,241
    )
    
    $
    (93,700
    )
    
    $
    (23,063
    )
    
    $
    (24,488
    )Amounts Recognized in Accumulated
Other Comprehensive Income (Loss)Net actuarial gain (loss)
    
    $
    (3,958
    )
    
    $
    
    
    
    $
    (15,598
    )
    
    $
    
    
    
    $
    2,795
    
    
    $
    Prior service credit (cost)
    
    
    (1,714
    )
    
    
    
    
    
    
    48,480
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability
    
    
    
    
    
    
    6,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    (5,672
    )
    
    $
    6,678
    
    
    $
    32,882
    
    
    $
    
    
    
    $
    2,795
    
    
    $
    
 78




---



##### 



Pension
    
    Postretirement
    
    SERPFifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-Two
    
    Three
    
    Two
    
    Two
    
    Three
    
    Two
    
    Two
    
    Three
    
    TwoWeeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    WeeksEnded
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    EndedJune 2,
    
    June 3,
    
    May 28,
    
    June 2,
    
    June 3,
    
    May 28,
    
    June 2,
    
    June 3,
    
    May 28,2007
    
    2006
    
    2005
    
    2007
    
    2006
    
    2005
    
    2007
    
    2006
    
    2005(dollars in thousands)Weighted-average
actuarial assumptionsLiability discount rate
    
    
    6.0
    %
    
    
    5.8
    %
    
    
    6.0
    %
    
    
    6.1
    %
    
    
    6.3
    %
    
    
    5.5
    %
    
    
    6.0
    %
    
    
    5.8
    %
    
    
    6.0
    %Expense discount rate
    
    
    5.8
    %
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    6.3
    %
    
    
    5.5
    %
    
    
    6.5
    %
    
    
    5.8
    %
    
    
    6.0
    %
    
    
    6.0
    %Expected return on
plan assets
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARate of compensation
increase
    
    
    4.5
    %
    
    
    4.5
    %
    
    
    4.5
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
   Pension
    
    
    Postretirement
    
    
    SERPFifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-Two
    
    
    Three
    
    
    Two
    
    
    Two
    
    
    Three
    
    
    Two
    
    
    Two
    
    
    Three
    
    
    TwoWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 2,
    
    
    June 3,
    
    
    May 28,
    
    
    June 2,
    
    
    June 3,
    
    
    May 28,
    
    
    June 2,
    
    
    June 3,
    
    
    May 28,2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005(dollars in thousands)Service cost
    
    $
    924
    
    
    $
    904
    
    
    $
    673
    
    
    $
    1,069
    
    
    $
    1,444
    
    
    $
    2,773
    
    
    $
    
    
    
    $
    
    
    
    $
    462Interest cost
    
    
    3,968
    
    
    
    4,038
    
    
    
    3,728
    
    
    
    3,374
    
    
    
    3,391
    
    
    
    4,840
    
    
    
    1,370
    
    
    
    1,354
    
    
    
    1,494Expected return on plan assets
    
    
    (5,402
    )
    
    
    (4,885
    )
    
    
    (4,347
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
(credit)
    
    
    275
    
    
    
    285
    
    
    
    173
    
    
    
    (7,392
    )
    
    
    (7,392
    )
    
    
    (6,644
    )
    
    
    
    
    
    
    
    
    
    
    1,259Recognized net actuarial loss
    
    
    32
    
    
    
    542
    
    
    
    200
    
    
    
    990
    
    
    
    1,308
    
    
    
    1,619
    
    
    
    
    
    
    
    
    
    
    
    58(203
    )
    
    
    884
    
    
    
    427
    
    
    
    (1,959
    )
    
    
    (1,249
    )
    
    
    2,588
    
    
    
    1,370
    
    
    
    1,354
    
    
    
    3,273Curtailment (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,272
    )
    
    
    
    
    
    
    
    
    
    
    10,341Net periodic benefit cost (credit)
    
    $
    (203
    )
    
    $
    884
    
    
    $
    427
    
    
    $
    (1,959
    )
    
    $
    (1,249
    )
    
    $
    (1,684
    )
    
    $
    1,370
    
    
    $
    1,354
    
    
    $
    13,614
   Pension
    
    
    Postretirement
    
    
    SERP(dollars in thousands)Net actuarial (gain) loss
    
    $
    
    
    
    $
    829
    
    
    $
    (72
    )Prior service cost (credit)
    
    
    272
    
    
    
    (7,392
    )
    
    
    Total estimated 2008 amortization
    
    $
    272
    
    
    $
    (6,563
    )
    
    $
    (72
    )
 79




---



##### 



Future Funding and Benefit Payments
  Fiscal Years Ending
    
    Pension
    
    Postretirement
    
    SERP(dollars in thousands)Employer contributions (reduced by expected participant contributions)2008
    
    $
    
    
    
    $
    4,698
    
    
    
    (A
    )Benefit payments2008
    
    $
    4,497
    
    
    $
    6,341
    
    
    
    (A
    )2009
    
    
    4,529
    
    
    
    5,938
    
    
    
    (A
    )2010
    
    
    4,573
    
    
    
    5,594
    
    
    
    (A
    )2011
    
    
    4,610
    
    
    
    5,537
    
    
    
    (A
    )2012
    
    
    4,685
    
    
    
    5,421
    
    
    
    (A
    )2013-2017
    
    
    24,692
    
    
    
    27,329
    
    
    
    (A
    )
 
 (A)
    
    Due to the suspension of the SERP, we are not currently contributing funds to the rabbi
trust or paying benefits to retirees. Future contributions and benefit payments are dependent on
the disposition of the plan in conjunction with the bankruptcy reorganization plan. Defined Benefit Pension Plan Assets
  Percentage of Plan Assetsat the Measurement DateTarget
    
    June 2,
    
    June 3,Allocation
    
    2007
    
    2006Equity securities
    
    
    78.0
    %
    
    
    77.6
    %
    
    
    77.0
    %Debt securities
    
    
    22.0
    
    
    
    21.2
    
    
    
    21.2Cash and cash equivalents
    
    
    
    
    
    
    1.2
    
    
    
    1.8Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Postretirement Health Care Cost Trend Rates
  June 2,
    
    June 3,2007
    
    2006Health care cost trend rate for next year
    
    
    10.0
    %
    
    
    9.0
    %Rate to which the cost trend rate is assumed to decline (ultimate trend rate)
    
    
    6.0
    %
    
    
    5.5
    %Year the rates reach the ultimate trend rate
    
    
    2015
    
    
    
    2014
 80




---



##### 



1%
    
    1%Increase
    
    Decrease(dollars in thousands)Effect on total of service and interest cost
    
    $
    184
    
    
    $
    (161
    )Effect on postretirement benefit obligation
    
    
    5,136
    
    
    
    (4,636
    )
 Employee Stock Purchase Plan
  Defined Contribution Retirement Plans
  Negotiated Multi-Employer Pension Plans
   81




---



##### 



Multi-Employer Postretirement Health Care Benefit Plans
  
 12. Key Employee Retention Plan
   
 13. Stock-Based Compensation
   1996 Stock Incentive Plan
  82




---



##### 



WeightedWeighted
    
    AverageAverage
    
    RemainingExercise Price
    
    Contractual
    
    AggregateShares
    
    Per Share
    
    Term
    
    Intrinsic Value(dollars in(in thousands)
    
    
    
    
    
    
    
    
    
    thousands)Outstanding, as of June 3, 2006
    
    
    4,099
    
    
    $
    16.41
    
    
    
    4.6Granted
    
    
    
    
    
    
    Surrendered
    
    
    (835
    )
    
    
    19.22Exercised
    
    
    
    
    
    
    Outstanding, as of June 2, 2007
    
    
    3,264
    
    
    $
    15.69
    
    
    
    4.2
    
    
    $
    23,280Exercisable at June 2, 2007
    
    
    3,264
    
    
    $
    15.69
    
    
    
    4.2
    
    
    $
    23,280
      83




---



##### 



WeightedAverageGrant DateShares
    
    Fair Value(in thousands)Nonvested, as of June 3, 2006
    
    
    162
    
    
    $
    14.49Granted
    
    
    
    
    
    
    Vested
    
    
    (43
    )
    
    
    14.80Surrendered
    
    
    (46
    )
    
    
    14.26Nonvested, as of June 2, 2007
    
    
    73
    
    
    $
    14.46
   Pro Forma Employee Stock-Based Compensation Expense
 Accounting for Stock-Based Compensation  Transition and Disclosure, an
amendment of FASB Statement No. 123
 Fifty-Three
    
    
    Fifty-TwoWeeks
    
    
    WeeksEnded
    
    
    EndedJune 3,
    
    
    May 28,2006
    
    
    2005(dollars in thousands,except per share data)Net loss, as reported
    
    $
    (128,317
    )
    
    $
    (379,280
    )Add: Stock-based employee
compensation expense included in
reported net income, net of related
tax effects
    
    
    944
    
    
    
    2,670Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects
    
    
    (1,375
    )
    
    
    (4,157
    )Pro forma net loss
    
    $
    (128,748
    )
    
    $
    (380,767
    )Basic and diluted loss per shareAs reported
    
    $
    (2.84
    )
    
    $
    (8.43
    )Pro forma
    
    
    (2.85
    )
    
    
    (8.46
    )
 84




---



##### 



14. Restructuring (Credits) Charges
  Fifty-Two
    
    
    Fifty-Three
    
    
    Fifty-TwoWeeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    EndedJune 2,
    
    
    June 3,
    
    
    May 28,2007
    
    
    2006
    
    
    2005(dollars in thousands)Severance costs
    
    $
    (414
    )
    
    $
    6,101
    
    
    $
    12,754Long-lived asset (credits) charges
    
    
    (5,511
    )
    
    
    (38,570
    )
    
    
    43,745Curtailment gain on a benefit plan
    
    
    
    
    
    
    (706
    )
    
    
    (6,913
    )Other exit costs
    
    
    1,852
    
    
    
    5,988
    
    
    
    4,707Total
    
    $
    (4,073
    )
    
    $
    (27,187
    )
    
    $
    54,293
 Fiscal 2006 Restructuring Plans
    Fiscal 2005 Restructuring Plans
    85




---



##### 



Fiscal 2004 Restructuring Plan
   Fiscal 2003 Restructuring Plan
   86




---



##### 



Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)
    
    Other
    
    Total(dollars in thousands)Fiscal 2003 PlanBalance 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2006
    
    
    
    
    
    
    (34
    )
    
    
    32
    
    
    
    (2
    )Cash Paid in Fiscal 2006
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    (32
    )Noncash Utilization in 2006
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    34Balance June 3, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2004 PlanBalance May 29, 2004
    
    
    1,360
    
    
    
    
    
    
    
    3,109
    
    
    
    4,469Expensed in Fiscal 2005
    
    
    (434
    )
    
    
    429
    
    
    
    2,267
    
    
    
    2,262Cash Paid in Fiscal 2005
    
    
    (871
    )
    
    
    
    
    
    
    (5,376
    )
    
    
    (6,247
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (429
    )
    
    
    
    
    
    
    (429
    )Balance May 28, 2005
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    55Expensed in Fiscal 2006
    
    
    
    
    
    
    (10,636
    )
    
    
    (97
    )
    
    
    (10,733
    )Cash Paid in Fiscal 2006
    
    
    (55
    )
    
    
    
    
    
    
    97
    
    
    
    42Noncash Utilization in 2006
    
    
    
    
    
    
    10,636
    
    
    
    
    
    
    
    10,636Balance June 3, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2007
    
    
    
    
    
    
    (8
    )
    
    
    4
    
    
    
    (4
    )Cash Paid in Fiscal 2007
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Noncash Utilization in 2007
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Balance June 2, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2005 Consolidation
& RIF PlanBalance May 29, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2005
    
    
    5,575
    
    
    
    6,119
    
    
    
    2,145
    
    
    
    13,839Cash Paid in Fiscal 2005
    
    
    (4,779
    )
    
    
    
    
    
    
    (1,534
    )
    
    
    (6,313
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (6,119
    )
    
    
    (611
    )
    
    
    (6,730
    )Balance May 28, 2005
    
    
    796
    
    
    
    
    
    
    
    
    
    
    
    796Expensed in Fiscal 2006
    
    
    
    
    
    
    270
    
    
    
    438
    
    
    
    708Cash Paid in Fiscal 2006
    
    
    (597
    )
    
    
    
    
    
    
    (438
    )
    
    
    (1,035
    )Noncash Utilization in 2006
    
    
    
    
    
    
    (270
    )
    
    
    
    
    
    
    (270
    )Balance June 3, 2006
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    199Expensed in Fiscal 2007
    
    
    8
    
    
    
    84
    
    
    
    229
    
    
    
    321Cash Paid in Fiscal 2007
    
    
    (197
    )
    
    
    
    
    
    
    (229
    )
    
    
    (426
    )Noncash Utilization in 2007
    
    
    
    
    
    
    (84
    )
    
    
    
    
    
    
    (84
    )Balance June 2, 2007
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Fiscal 2005 PC Review PlanBalance May 29, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2005
    
    
    7,613
    
    
    
    32,426
    
    
    
    (6,912
    )
    
    
    33,127Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Noncash Utilization in 2005
    
    
    
    
    
    
    (32,426
    )
    
    
    6,913
    
    
    
    (25,513
    )Balance May 28, 2005
    
    
    7,613
    
    
    
    
    
    
    
    
    
    
    
    7,613Expensed in Fiscal 2006
    
    
    (407
    )
    
    
    (13,769
    )
    
    
    1,884
    
    
    
    (12,292
    )Cash Paid in Fiscal 2006
    
    
    (6,313
    )
    
    
    
    
    
    
    (2,492
    )
    
    
    (8,805
    )Noncash Utilization in 2006
    
    
    
    
    
    
    13,769
    
    
    
    706
    
    
    
    14,475Balance June 3, 2006
    
    
    893
    
    
    
    
    
    
    
    98
    
    
    
    991Expensed in Fiscal 2007
    
    
    (341
    )
    
    
    632
    
    
    
    944
    
    
    
    1,235Cash Paid in Fiscal 2007
    
    
    (548
    )
    
    
    
    
    
    
    (1,042
    )
    
    
    (1,590
    )Noncash Utilization in 2007
    
    
    
    
    
    
    (632
    )
    
    
    
    
    
    
    (632
    )Balance June 2, 2007
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4
 87




---



##### 



Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)
    
    Other
    
    Total(dollars in thousands)Software Write-offBalance May 29, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2005
    
    
    
    
    
    
    4,509
    
    
    
    
    
    
    
    4,509Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2005
    
    
    
    
    
    
    (4,509
    )
    
    
    
    
    
    
    (4,509
    )Balance May 28, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2006 PC Review PlanBalance May 28, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2006
    
    
    6,163
    
    
    
    (14,401
    )
    
    
    3,025
    
    
    
    (5,213
    )Cash Paid in Fiscal 2006
    
    
    (5,163
    )
    
    
    
    
    
    
    (2,980
    )
    
    
    (8,143
    )Noncash Utilization in 2006
    
    
    
    
    
    
    14,401
    
    
    
    
    
    
    
    14,401Balance June 3, 2006
    
    
    1,000
    
    
    
    
    
    
    
    45
    
    
    
    1,045Expensed in Fiscal 2007
    
    
    (240
    )
    
    
    (6,219
    )
    
    
    620
    
    
    
    (5,839
    )Cash Paid in Fiscal 2007
    
    
    (700
    )
    
    
    
    
    
    
    (665
    )
    
    
    (1,365
    )Noncash Utilization in 2007
    
    
    
    
    
    
    6,219
    
    
    
    
    
    
    
    6,219Balance June 2, 2007
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    60Accounting Office ClosingsBalance May 28, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2006
    
    
    345
    
    
    
    
    
    
    
    
    
    
    
    345Cash Paid in Fiscal 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance June 3, 2006
    
    
    345
    
    
    
    
    
    
    
    
    
    
    
    345Expensed in Fiscal 2007
    
    
    159
    
    
    
    
    
    
    
    55
    
    
    
    214Cash Paid in Fiscal 2007
    
    
    (461
    )
    
    
    
    
    
    
    (46
    )
    
    
    (507
    )Noncash Utilization in 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance June 2, 2007
    
    
    43
    
    
    
    
    
    
    
    9
    
    
    
    52ConsolidatedBalance 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
    
    
    
    
    
    
    
    
    
    
    
    8,464Expensed in Fiscal 2006
    
    
    6,101
    
    
    
    (38,570
    )
    
    
    5,282
    
    
    
    (27,187
    )Cash Paid in Fiscal 2006
    
    
    (12,128
    )
    
    
    
    
    
    
    (5,845
    )
    
    
    (17,973
    )Noncash Utilization in 2006
    
    
    
    
    
    
    38,570
    
    
    
    706
    
    
    
    39,276Balance June 3, 2006
    
    
    2,437
    
    
    
    
    
    
    
    143
    
    
    
    2,580Expensed in Fiscal 2007
    
    
    (414
    )
    
    
    (5,511
    )
    
    
    1,852
    
    
    
    (4,073
    )Cash Paid in Fiscal 2007
    
    
    (1,906
    )
    
    
    
    
    
    
    (1,986
    )
    
    
    (3,892
    )Noncash Utilization in 2007
    
    
    
    
    
    
    5,511
    
    
    
    
    
    
    
    5,511Balance June 2, 2007
    
    $
    117
    
    
    $
    
    
    
    $
    9
    
    
    $
    126
 88




---



##### 



Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)
    
    Other
    
    TotalFiscal 2003 Plan
    
    $
    4,304
    
    
    $
    1,474
    
    
    $
    6,825
    
    
    $
    12,603Fiscal 2004 Plan
    
    
    2,537
    
    
    
    (8,091
    )
    
    
    7,006
    
    
    
    1,452Fiscal 2005 Consolidation & RIF Plan
    
    
    5,583
    
    
    
    6,473
    
    
    
    2,812
    
    
    
    14,868Fiscal 2005 PC Review Plan
    
    
    6,865
    
    
    
    19,289
    
    
    
    (4,084
    )
    
    
    22,070Software Write-off
    
    
    
    
    
    
    4,509
    
    
    
    
    
    
    
    4,509Fiscal 2006 PC Review Plan
    
    
    5,923
    
    
    
    (20,620
    )
    
    
    3,645
    
    
    
    (11,052
    )Accounting Office Closings
    
    
    504
    
    
    
    
    
    
    
    55
    
    
    
    559
   Long-LivedSeverance
    
    Assetand Related
    
    ChargesBenefits
    
    (Credits)
    
    Other
    
    TotalFiscal 2005 PC Review Plan
    
    $
    
    
    
    $
    
    
    
    $
    494
    
    
    $
    494
 
  15. Reorganization Charges
  Fifty-Two Weeks Ended
    
    
    Fifty-Three Weeks Ended
    
    
    Fifty-Two Weeks EndedJune 2, 2007
    
    
    June 3, 2006
    
    
    May 28, 2005Reorganization
    
    
    Cash
    
    
    Reorganization
    
    
    Cash
    
    
    Reorganization
    
    
    CashCharges
    
    
    Payments
    
    
    Charges
    
    
    Payments
    
    
    Charges
    
    
    Payments(dollars in thousands)Professional fees
    
    $
    35,352
    
    
    $
    37,374
    
    
    $
    35,089
    
    
    $
    35,211
    
    
    $
    33,184
    
    
    $
    27,269Employee retention expenses
(See Note 12)
    
    
    963
    
    
    
    3,317
    
    
    
    6,047
    
    
    
    4,332
    
    
    
    5,641
    
    
    
    1,934Lease rejections
    
    
    210
    
    
    
    20
    
    
    
    937
    
    
    
    
    
    
    
    (427
    )
    
    
    (140
    )Interest income
    
    
    (3,075
    )
    
    
    (3,794
    )
    
    
    (4,461
    )
    
    
    (3,562
    )
    
    
    (537
    )
    
    
    (537
    )Gain on sale of assets
    
    
    (825
    )
    
    
    (825
    )
    
    
    (597
    )
    
    
    (597
    )
    
    
    (1,655
    )
    
    
    (1,655
    )Write-off of debt fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    Reorganization charges, net
    
    $
    32,625
    
    
    $
    36,092
    
    
    $
    37,015
    
    
    $
    35,384
    
    
    $
    39,206
    
    
    $
    26,871
 89




---



##### 



16. Income Taxes
  Fifty-Two
    
    Fifty-Three
    
    Fifty-TwoWeeks Ended
    
    Weeks Ended
    
    Weeks EndedJune 2,
    
    June 3,
    
    May 28,2007
    
    2006
    
    2005Statutory federal tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income tax, net
    
    
    2.6
    
    
    
    1.1
    
    
    
    2.6Non-deductible goodwill impairment
    
    
    
    
    
    
    
    
    
    
    (15.8
    )Valuation allowance increase
    
    
    (30.0
    )
    
    
    (25.9
    )
    
    
    (14.7
    )Adjustments to prior year tax reserve and refundable credits
    
    
    0.8
    
    
    
    1.8
    
    
    
    2.0Other
    
    
    (1.9
    )
    
    
    (1.1
    )
    
    
    (0.3
    )6.5
    %
    
    
    10.9
    %
    
    
    8.8
    %
    Fifty-Two
    
    
    Fifty-Three
    
    
    Fifty-TwoWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedJune 2,
    
    
    June 3,
    
    
    May 28,2007
    
    
    2006
    
    
    2005(dollars in thousands)CurrentFederal
    
    $
    (5,785
    )
    
    $
    (9,759
    )
    
    $
    (38,534
    )State
    
    
    (1,251
    )
    
    
    (4,153
    )
    
    
    (5,755
    )(7,036
    )
    
    
    (13,912
    )
    
    
    (44,289
    )DeferredFederal
    
    
    (755
    )
    
    
    (1,508
    )
    
    
    6,953State
    
    
    (86
    )
    
    
    (173
    )
    
    
    797(841
    )
    
    
    (1,681
    )
    
    
    7,750$
    (7,877
    )
    
    $
    (15,593
    )
    
    $
    (36,539
    )
 90




---



##### 



June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)Deferred tax liabilities:Property and equipment
    
    $
    (116,988
    )
    
    $
    (127,815
    )Intangibles
    
    
    (46,257
    )
    
    
    (43,415
    )Other
    
    
    (10,735
    )
    
    
    (9,908
    )Gross deferred tax liabilities
    
    
    (173,980
    )
    
    
    (181,138
    )Deferred tax asset:Payroll and benefits accruals
    
    
    77,362
    
    
    
    87,189Self-insurance reserves
    
    
    81,288
    
    
    
    79,835Net operating loss carryforwards
    
    
    71,023
    
    
    
    41,302Other
    
    
    10,850
    
    
    
    16,010Gross deferred tax assets
    
    
    240,523
    
    
    
    224,336Less: Valuation allowance
    
    
    (123,281
    )
    
    
    (98,193
    )Net deferred tax asset
    
    
    117,242
    
    
    
    126,143Net deferred tax liability
    
    $
    (56,738
    )
    
    $
    (54,995
    )
   June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)Other current assets
    
    $
    18,051
    
    
    $
    22,824Deferred income taxes (non-current)
    
    
    (74,789
    )
    
    
    (77,819
    )Net deferred tax liability
    
    $
    (56,738
    )
    
    $
    (54,995
    )
    
 17. Commitments and Contingencies
  91




---



##### 



92




---



##### 



93




---



##### 



94




---



##### 



18. Stock Repurchases
  
 19. Stockholder Rights Plan
  95




---



##### 



20. Earnings (Loss) Per Share
 Earnings per
Share
  Fifty-Two
    
    Fifty-Three
    
    Fifty-TwoWeeks Ended
    
    Weeks Ended
    
    Weeks EndedJune 2,
    
    June 3,
    
    May 28,2007
    
    2006
    
    2005(in thousands)Weighted average common shares outstanding:Basic and diluted
    
    
    45,171
    
    
    
    45,124
    
    
    
    45,010
   96




---



##### 



21. Comprehensive Loss
  Fifty-Two
    
    
    Fifty-Three
    
    
    Fifty-TwoWeeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    EndedJune 2,
    
    
    June 3,
    
    
    May 28,2007
    
    
    2006
    
    
    2005(dollars in thousands)Net loss
    
    $
    (112,848
    )
    
    $
    (128,317
    )
    
    $
    (379,280
    )Other comprehensive income (loss):Change in fair value of cash flow hedges, net of income taxes of $0
    
    
    
    
    
    
    
    
    
    
    (96
    )Loss on interest rate swaps reclassified to interest expense, net of income taxes of $0
    
    
    
    
    
    
    
    
    
    
    816Commodity derivative (gains) losses reclassified to cost of products sold, net of
income taxes of $0
    
    
    
    
    
    
    (671
    )
    
    
    275Minimum pension liability adjustment, net of income taxes of $2,585, $0, and $0
    
    
    650
    
    
    
    4,328
    
    
    
    (3,918
    )650
    
    
    
    3,657
    
    
    
    (2,923
    )Comprehensive loss
    
    $
    (112,198
    )
    
    $
    (124,660
    )
    
    $
    (382,203
    )
  The balance of AOCI consists of the following:June 2,
    
    
    June 3,2007
    
    
    2006(dollars in thousands)Minimum pension liability adjustment
    
    $
    
    
    
    $
    (3,878
    )Unamortized pension and other postretirement net credits
(See Note 11. Employee Benefit Plans)
    
    
    30,220
    
    
    
    Total
    
    $
    30,220
    
    
    $
    (3,878
    )
 
 22. Segment Information
 Disclosures about Segments of an Enterprise and Related Information
  Wholesale operations
 Retail operations
   97




---



##### 



Fifty-Two
    
    
    Fifty-Three
    
    
    Fifty-TwoWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedJune 2, 2007
    
    
    June 3, 2006
    
    
    May 28, 2005(dollars in thousands)Net SalesWholesale operations
    
    $
    2,594,408
    
    
    $
    2,701,751
    
    
    $
    2,995,481Retail operations
    
    
    322,860
    
    
    
    358,722
    
    
    
    408,024Total net sales
    
    $
    2,917,268
    
    
    $
    3,060,473
    
    
    $
    3,403,505Operating Income (Loss)Wholesale operations
    
    $
    32,393
    
    
    $
    (7,353
    )
    
    $
    43,874Retail operations
    
    
    10,902
    
    
    
    10,682
    
    
    
    7,26443,295
    
    
    
    3,329
    
    
    
    51,138Corporate
    
    
    (82,936
    )
    
    
    (59,697
    )
    
    
    (386,674
    )Total operating loss
    
    
    (39,641
    )
    
    
    (56,368
    )
    
    
    (335,536
    )Interest expense
    
    
    49,591
    
    
    
    52,504
    
    
    
    41,430Reorganization charges
    
    
    32,625
    
    
    
    37,015
    
    
    
    39,206Other income
    
    
    (1,132
    )
    
    
    (2,994
    )
    
    
    (353
    )81,084
    
    
    
    86,525
    
    
    
    80,283Loss before income taxes and cumulative effect of
accounting change
    
    
    (120,725
    )
    
    
    (142,893
    )
    
    
    (415,819
    )Provision (benefit) for income taxes
    
    
    (7,877
    )
    
    
    (15,593
    )
    
    
    (36,539
    )Loss before cumulative effect of accounting change
    
    
    (112,848
    )
    
    
    (127,300
    )
    
    
    (379,280
    )Cumulative effect of accounting change
    
    
    
    
    
    
    (1,017
    )
    
    
    Net Loss
    
    $
    (112,848
    )
    
    $
    (128,317
    )
    
    $
    (379,280
    )
 98




---



##### 



23. Quarterly Financial Information (Unaudited)
  First
    
    Second
    
    Third
    
    Fourth(dollars in thousands, except per share data)2007Net sales
    
    $
    684,245
    
    
    $
    671,913
    
    
    $
    861,641
    
    
    $
    699,469Cost of products sold (exclusive of depreciation and amortization)
    
    
    352,172
    
    
    
    347,521
    
    
    
    440,215
    
    
    
    349,111Gross profit (exclusive of depreciation and amortization)
    
    
    332,073
    
    
    
    324,392
    
    
    
    421,426
    
    
    
    350,358Operating loss
    
    
    (7,759
    )
    
    
    (6,751
    )
    
    
    (19,666
    )
    
    
    (5,465
    )Net loss
    
    
    (26,331
    )
    
    
    (26,285
    )
    
    
    (42,235
    )
    
    
    (17,997
    )Basic and diluted loss per share
    
    
    (0.58
    )
    
    
    (0.58
    )
    
    
    (0.94
    )
    
    
    (0.40
    )2006Net sales
    
    $
    744,649
    
    
    $
    702,381
    
    
    $
    874,809
    
    
    $
    738,634Cost of products sold (exclusive of depreciation and amortization)
    
    
    370,413
    
    
    
    357,022
    
    
    
    455,740
    
    
    
    369,556Gross profit (exclusive of depreciation and amortization)
    
    
    374,236
    
    
    
    345,359
    
    
    
    419,069
    
    
    
    369,078Operating loss
    
    
    9,504
    
    
    
    (41,928
    )
    
    
    (19,859
    )
    
    
    (4,085
    )Loss before cumulative effect of accounting change
    
    
    (6,987
    )
    
    
    (53,325
    )
    
    
    (42,634
    )
    
    
    (24,354
    )Net loss
    
    
    (6,987
    )
    
    
    (53,325
    )
    
    
    (42,634
    )
    
    
    (25,371
    )Basic and diluted loss per share before cumulative effect of
accounting change
    
    
    (0.15
    )
    
    
    (1.18
    )
    
    
    (0.94
    )
    
    
    (0.54
    )
   99




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##### 



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.
    100




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##### 



Insufficient Resources
 Use of Third Party Specialists
   Changes in Internal Control over Financial Reporting
   
    
    Financial Statement Closing Process:The controls over the financial statement
closing process did not operate effectively. Due to the personnel shortages and the
additional requirements associated with the Chapter 11 proceedings, the Company had not been
able to file required reports with the SEC on a timely basis, nor had we been able to perform
related internal control activities including reconciliations and financial statement reviews
on a timely basis. The Company completed the implementation of internal controls relating to
the financial closing and reporting process and management assessed and concluded on the
operating effectiveness of those controls. As a result of those efforts, the Company has
filed its consolidated financial statements contained in the quarterly and annual reports to
the SEC for the fiscal years June 3, 2006 and June 2, 2007.
    
    Accrued Compensated Absences: We did not maintain effective controls over the
tracking, recording and valuation of the accrued compensated absences liabilities related to
our employees. Specifically, effective controls were not designed and in place to ensure that
appropriate tracking mechanisms were adequately functioning, employee eligibility data was
accurate and all applicable rules were accurately and consistently applied to each employee.
A centralized tracking mechanism to record and value accrued compensated absences has been
formalized and implemented. In addition, we undertook an extensive manual effort to cleanse
all employee eligibility data.
    
    Recording Purchases and Processing Expenditures: We did not maintain effective
controls over the complete, accurate and timely processing of purchase and expenditure
transactions. Specifically, our ineffective controls
 101




---



##### 



included those necessary to ensure all
vendors invoices were being received, reviewed, approved, processed and recorded accurately
and in the proper accounting period. Controls were designed and implemented to
establish a formalized spend authorization policy for all levels of the Company to ensure
proper review and approval of expenditures. In addition, controls relating to the accurate
and timely recording of expenditures were determined to be operating effectively.
    
    Information Technology Access Controls: We did not maintain effective controls
over access to information technology programs and systems. Specifically, we did not have
adequate policies and procedures to control security and access, there were inadequate
controls restricting access to such programs and systems by information technology personnel
and there was a lack of periodic, independent review and monitoring of such access.
Policies have been issued and controls have been added to appropriately restrict and monitor
access to information technology programs and systems.
    
    Third Party Service Providers: Our ineffective controls included the failure to
review and evaluate the potential impact of the third party service providers work on our
financial statements and their internal controls over their processes. Controls were
designed and implemented to evaluate the significance of third party service providers and
their impact on our internal control over financial reporting. As a result of this, we
concluded that the third party service provider controls in conjunction with our own user
controls are operating effectively.
    
    Review and Approval of Contracts: We did not maintain effective controls to
ensure compliance with established policies by personnel entering into contracts and other
commitments. Specifically, effective controls were not designed and activities of personnel
were not monitored to ensure compliance with review and approval requirements for contracts.
Controls were designed and implemented over contracts. Specifically, contracting authority
for the review and approval of new contracts and other commitments has been defined and
implemented for appropriate communication, accounting and disclosure.
    
    Recording Restructuring and Reorganization Expenses and Liabilities: We did not
maintain effective controls over the accurate and timely recognition of restructuring and
reorganization costs. Specifically, we did not have adequate policies or procedures to
properly identify adjustments to costs and related liabilities for restructuring and lease
rejection activities undertaken in conjunction with the bankruptcy and to accurately and
timely reflect such activities in the proper accounting period. Management has established
improved controls over the accurate and timely identification of ongoing restructuring and
reorganization activities associated with the bankruptcy through the development of
formalized processes.
  
    
    service providers continue to be utilized to address shortfalls in staffing and assist us with
accounting, finance and benefits responsibilities; and
    
    we continue to improve controls over the review and accuracy of data provided to third party specialists.
  102




---



##### 



Internal Control 
Integrated Framework
     Insufficient Resources
 Use of Third Party Specialists
 103




---



##### 



Internal Control Integrated Framework Internal Control Integrated
Framework
   
 104




---



##### 



ITEM 9B. OTHER INFORMATION
  105




---



##### 



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Board of Directors
  DirectorName
    
    Age
    
    Since
    
    Principal Occupation or Employment for the Last Five Years and DirectorshipsMichael J. Anderson 1
    
    
    56
    
    
    
    1998
    
    
    Chairman of the Board of IBC since January 2007; President and Chief
Executive Officer of The Andersons, Inc., a diversified agribusiness and
retailing company, for more than five years. Mr. Anderson is a director of
The Andersons, Inc. and FirstEnergy Corp.Robert B. Calhoun 1,2
    
    
    64
    
    
    
    1991
    
    
    Managing Director of Monitor Clipper Partners, a private equity investment
firm, for more than five years. Mr. Calhoun is a director of Avondale
Mills, Inc. and The Lord Abbett Family of Funds.Craig D. Jung
    
    
    54
    
    
    
    2007
    
    
    Chief Executive Officer of IBC since February 2007; Retired, June 2004 to
February 2007; Attended Harvard University, August 2003 to June 2004, where
he received a Masters Degree in Public Administration; President, Chief
Executive Officer and Director of Panamerican Beverages, Inc. (now
Coca-Cola FEMSA), a company that bottled Coca-Cola soft drink products,
August 2002 to May 2003.William P. Mistretta1
    
    
    51
    
    
    
    2006
    
    
    Senior Operations Executive for a division of the U.S. operations of
Compass Group PLC, a company specializing in providing food, vending and
related services, since March 2006; Vice President of Operations of Aramark
Uniform and Career Apparel, Inc., a company that provides both rental and
direct marketing of uniforms and career apparel, May 2004 to April 2005;
Senior Vice President of Operations of The B. Manishewitz Company, the
nations largest manufacturer of processed kosher food products, May 2003
to May 2004; Co-Founder of American Baked Ingredients, LLC, January 2001 to
May 2003.David I. Pauker2,3
    
    
    48
    
    
    
    2007
    
    
    Director of Goldin Associates, LLC, a financial advisory and turnaround
consulting firm specializing in underperforming businesses and distressed
situations, for more than five years.Terry R. Peets2,3
    
    
    62
    
    
    
    2007
    
    
    Senior Advisor with CCMP Capital, a private equity firm focusing on the
consumer, retail and services; energy; health care infrastructure;
industrials; and media and telecom industries, for more than five years.
Mr. Peets is a director of Pinnacle Foods Group Inc. and Winn-Dixie Stores,
Inc.  He is also a director of the following companies, which are not publicly held: World Kitchens, Inc. (Chairman of the Board), City of Hope National Cancer Center and the Beckman Research Institute (Chairman of the Board), and Ruiz Foods Corp.Philip A. Vachon3
    
    
    50
    
    
    
    2007
    
    
    Retired since July 2007; Chief Executive Officer and Chairman of the Board
of Liberate Technologies, a non-operating company working to resolve
outstanding liabilities, prosecute and defend pending litigation and pursue
other claims as appropriate, from 2006 to July 2007; President of Liberate
Technologies from 2003 to July 2007; and retired for more than a year prior
thereto.
 
 1
    
    Member of the Audit Committee2
    
    Member of the Compensation Committee3
    
    Member of the Nominating/Corporate Governance Committee 106




---



##### 



Executive Officers
  Name
    
    Age
    
    Present Principal Occupation or Employment and Five-Year Employment HistoryCraig D. Jung
    
    
    54
    
    
    Chief Executive Officer of IBC since February 2007; Retired, June 2004 to
February 2007; Attended Harvard University, August 2003 to June 2004,
where he received a Masters Degree in Public Administration; President,
Chief Executive Officer and Director of Panamerican Beverages, Inc. (now
Coca-Cola FEMSA), a company that bottled Coca-Cola soft drink products,
August 2002 to May 2003.Michael D. Kafoure
    
    
    58
    
    
    President and Chief Operating Officer of IBC for more than the past five
years.Kent B. Magill
    
    
    54
    
    
    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.Robert P. Morgan
    
    
    51
    
    
    Executive Vice President  Wholesale Business Unit, Upper Midwest, North
Central 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
    
    
    52
    
    
    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; Executive Vice President
of Earthgrains/Sara Lee Corporation, a company engaged in the manufacture
and distribution of wholesale baked goods, for more than one year prior
thereto.Richard C. Seban
    
    
    55
    
    
    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, for more than three years prior thereto.Richard D. Willson
    
    
    59
    
    
    Executive Vice President  Wholesale Business Unit, Western Region of IBC
since June 2004; Executive Vice President of the Western Division of IBC
for more than two years prior thereto.J. Randall Vance
    
    
    46
    
    
    Senior Vice President, Chief Financial Officer and Treasurer of IBC since
August 2007; Senior Vice President  Finance and Treasurer of IBC from
September 2004 through July 2007; Vice President and Treasurer of Farmland
Industries, Inc., a diversified agribusiness cooperative, from July 2002
to January 2004.Laura D. Robb
    
    
    49
    
    
    Vice President and Corporate Controller of IBC since July 2002.Melvin H. Ghearing
    
    
    58
    
    
    Vice President  Bakery Outlet Business Unit since June 2004 and Vice
President  Retail Operations for more than two years prior thereto.David A. Loeser
    
    
    53
    
    
    Consultant, Acting Executive Vice President  Human Resources of IBC since
July 2007; Consultant of IBC from May 2007 to July 2007; Senior Vice
President Human Resources, Celanese Corporation, a company engaged in the
manufacture of building block chemicals, from April 2005 to May 2006;
Senior Vice President Human Resources, Compucom Systems, Inc., a company
offering business software applications and software management services,
for more than three years prior thereto.
 107




---



##### 



Name
    
    Age
    
    Present Principal Occupation or Employment and Five-Year Employment HistoryJane S. Miller
    
    
    48
    
    
    Consultant, Acting Executive Vice President-Chief Customer Officer of IBC
since July 2007; Consultant of IBC from March 2007 to July 2007;
President, Miller Management Group, Inc. from September 2006 to present;
President, UK and Ireland Division, of HJ Heinz Company, a company that
manufactures an extensive line of processed food products, from May 2005
to May 2006; Chief Growth Officer of HJ Heinz Company from September 2004
to May 2005; Attended Regis University during the 2 years prior thereto.Gary K. Wandschneider
    
    
    55
    
    
    Consultant, Acting Executive Vice President  Operations of IBC since July
2007; Executive Vice President Pepsi Bottling Group, Inc., the largest
manufacturer and distribution of Pepsi-Cola beverages, for more than four
years prior to November 2006.
 Involvement in Prior Bankruptcy Proceedings and/or Restructurings
  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Business Conduct and Ethics
  Audit Committee
 www.interstatebakeriescorp.com
 
 ITEM 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
 Overview
  108




---



##### 



Recent Company History
     109




---



##### 



General Compensation Philosophy
  
    
    Attracting and retaining the best possible executive talent;
    
    Motivating executive officers to achieve the Companys performance
objectives to maximize the value of our bankruptcy estate for our
constituents; and
    
    Rewarding individual performance.
  
    
    Periodic cash incentive payments have been made under our Key
Employee Retention Plan upon the achievement of certain
pre-determined financial results.
    
    Payment to certain members of management will be made under the
Fiscal 2007 Management Incentive Plan based on the achievement of a
financial target.
 Executive Compensation Components
  
    
    Base salary;
 110




---



##### 




    
    Annual bonus;
    
    Key Employee Retention Plan; and
    
    Executive retirement benefits, severance benefits, and perquisites.
   Salary
   Annual Bonus
    111




---



##### 



Key Employee Retention Plan
 KERP
  Executive Benefits and Perquisites
  SERP
 IBC Supplemental Executive Retirement Plan
 Perquisites
  Severance and Change-in-Control Benefits
 Potential
Payments upon Termination or Change in Control
 Compensation Committee Report
  112




---



##### 



Summary Compensation Table
  Change inPension ValueandNonqualifiedNon-Equity
    
    DeferredIncentive Plan
    
    Compensation
    
    All otherName and principal
    
    
    
    
    
    Salary
    
    Bonus1
    
    Compensation
    
    Earnings2
    
    Compensation3
    
    Totalposition
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Craig D. Jung4
    
    
    2007
    
    
    
    263,080
    
    
    
    1,200,000
    
    
    
    
    
    
    
    
    
    
    
    158,590
    
    
    
    1,621,670CEOAntonio C. Alvarez II5
    
    
    2007
    
    
    
    1,275,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,275,000Former CEORonald B. Hutchison6
    
    
    2007
    
    
    
    350,000
    
    
    
    
    
    
    
    166,250
    7
    
    
    624
    
    
    
    4,937
    
    
    
    521,811Former EVP and CFOMichael D. Kafoure
    
    
    2007
    
    
    
    486,948
    
    
    
    
    
    
    
    231,300
    8
    
    
    24,592
    
    
    
    14,982
    
    
    
    757,822President and COORichard C. Seban
    
    
    2007
    
    
    
    375,000
    
    
    
    75,000
    
    
    
    93,750
    9
    
    
    
    
    
    
    9,755
    
    
    
    553,505EVP and CMOJohn K. Suckow 5
    
    
    2007
    
    
    
    1,303,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,303,275Former EVP and CRO
 
 1
    
    Pursuant to the terms of his employment agreement, Mr. Jung received a signing bonus of $1,200,000.
Pursuant to the terms of his Offer of Employment, Mr. Seban was guaranteed a bonus for fiscal 2006 of
$75,000, which was paid in 2007.2
    
    As described below under IBC Supplemental Executive Retirement Plan, participation in our Supplemental
Executive Retirement Plan is suspended. The change in pension value is the result of a change in the
discount rate used and interest calculated for financial statement purposes. Mr. Hutchisons
participation in the plan terminated in connection with his resignation on July 31, 2007 as Executive Vice
President and Chief Financial Officer of the Company.3
    
    All other compensation for the fiscal year ended June 2, 2007 includes: (i) fees paid by the Company to
Mr. Jungs attorney in connection with the negotiation of his employment agreement in the amount of
$147,520; (ii) the Companys contributions in the amount of $8,100 and $5,400, which accrued during such
fiscal year for the accounts of Messrs. Kafoure and Seban, respectively, under our Companys Retirement
Income Plan; (iii) the imputed income for term life insurance provided by the Company for the benefit of
Messrs. Hutchison and Seban in the amounts of $1,806 and $793, respectively; (iv) the imputed income for
use of a Company car by Messrs. Hutchison, Kafoure and Seban in the amounts of $785, $4,072 and $3,562,
respectively; (v) taxable income for financial advisory services to Messrs. Jung, Hutchison and Kafoure in
the amounts of $1,522, $2,346 and $2,810, respectively, and (vi) $9,548 for Mr. Jung related to moving
expenses.4
    
    Pursuant to Mr. Jungs employment agreement, he is to receive a special cash award for enhancing our value
during bankruptcy and an equity award (one-half capital stock and one-half options) upon our emergence
from Chapter 11. At this time, the amounts are not determinable. See the discussion of his employment
agreement under Employment Agreements with Named Executive Officers. 113




---



##### 



5
    
    Messrs. Alvarez and Suckow were designated 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 March 2006. Mr.
Alvarez resigned in connection with the election of Craig D. Jung as our Chief Executive Officer. Mr.
Suckow resigned as Executive Vice President and Chief Restructuring Officer of the Company effective
August 8, 2007.6
    
    Mr. Hutchison resigned as our Executive Vice President and Chief Financial Officer effective July 31, 2007.7
    
    This amount reflects $78,750 paid as restructuring performance bonuses pursuant to the KERP (as described
below) and $87,500 to be paid as a bonus under the fiscal 2007 Incentive Compensation Plan (as described
below).8
    
    This amount consists of: $109,563 paid as restructuring performance bonuses pursuant to the KERP and
$121,737 to be paid as a bonus under the Fiscal 2007 Incentive Compensation Plan.9
    
    This amount reflects a bonus to be paid pursuant to the Fiscal 2007 Incentive Compensation Plan. Grants of Plan-Based Awards in the Fiscal Year Ended June 2, 2007
 Estimated Future Payouts UnderNon-Equity Incentive Plan Awards1Target
    
    MaximumName
    
    ($)
    
    ($)Craig D. Jung 2
    
    
    
    
    
    
    Antonio C. Alvarez II
    
    
    
    
    
    
    Ronald B. Hutchison
    
    
    87,500
    
    
    
    131,250Michael D. Kafoure
    
    
    121,737
    
    
    
    182,606Richard C. Seban
    
    
    93,750
    
    
    
    140,625John K. Suckow
    
    
    
    
    
    
    
 
 1
    
    Our Fiscal 2007 Management Incentive Plan was approved by our Board
in August 2006 and approved by the Bankruptcy Court in March 2007.
There is no threshold payment under the plan, and there is a
potential discretionary bonus pool payment that is not included in
the maximum.2
    
    Pursuant to Mr. Jungs employment agreement, he is to receive a
special cash award for enhancing our value during bankruptcy and an
equity award (one-half capital stock and one-half options) upon our
emergence from Chapter 11. At this time, the amounts are not
determinable. See the discussion of his employment agreement under
Employment Agreements with Named Executive Officers. Fiscal 2007 Management Incentive Plan
  114




---



##### 



Employment Agreements with Named Executive Officers
  Craig D. Jung
  (1)
    
    0.25% of Total Enterprise Value (as defined in the employment agreement) in
excess of $500 million but less than $600 million, plus; (ii) an additional 0.50% of
Total Enterprise Value in excess of $600 million but less than $700 million, plus;
(iii) an additional 0.75% of Total Enterprise Value in excess of $700 million but less
than $800 million, plus; (iv) an additional 1.0% of Total Enterprise Value in excess of
$800 million, not to exceed $3,000,000; and(2)
    
    1.75% of Total Enterprise Value in excess of an amount equal to the sum of: (i)
$700 million, plus (ii) 95% of the Triggered Contingent Claims Amount (as defined in
the employment agreement).
  Potential Payments Upon Termination or Change in Control
 Michael D. Kafoure
  115




---



##### 



Potential
Payments Upon Termination or Change in Control
 Alvarez and Marsal Agreement
     116




---



##### 



Key Employee Retention Plan
   Retention Bonuses
  Restructuring Performance Bonuses
    117




---



##### 



Outstanding Equity Awards at Fiscal Year-End
 Option Awards
    
    
    
    
    
    
    
    
    
    Stock AwardsNumber of
    
    Number ofsecurities
    
    securities
    
    
    
    
    
    
    
    
    
    Number ofunderlying
    
    underlying
    
    
    
    
    
    
    
    
    
    Shares or
    
    Market Valueunexercised
    
    unexercised
    
    Option
    
    
    
    
    
    Units of Stock
    
    of Shares ofoptions
    
    options
    
    Exercise
    
    
    
    
    
    That Have not
    
    Units of Stock(#)
    
    (#)
    
    Price
    
    Option Expiration
    
    Vested
    
    That Have notName
    
    Grant Date
    
    Exercisable1
    
    Unexercisable
    
    ($)
    
    Date
    
    (#)
    
    Vested ($)Craig D. Jung2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Antonio C. Alvarez
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ronald B. Hutchison
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,666
    3
    
    
    16,998Michael D. Kafoure
    
    
    9/23/1997
    
    
    
    200,000
    
    
    
    
    
    
    
    33.9063
    
    
    
    9/23/2007
    
    
    
    
    
    
    
    8/6/1998
    
    
    
    25,000
    
    
    
    
    
    
    
    27.0625
    
    
    
    8/6/2008
    
    
    
    
    
    
    
    7/13/1999
    
    
    
    30,000
    
    
    
    
    
    
    
    23.75
    
    
    
    7/13/2009
    
    
    
    
    
    
    
    5/8/2000
    
    
    
    30,000
    
    
    
    
    
    
    
    14.50
    
    
    
    5/8/2010
    
    
    
    
    
    
    
    5/7/2001
    
    
    
    25,000
    
    
    
    
    
    
    
    14.10
    
    
    
    5/7/2011
    
    
    
    
    
    
    
    7/9/2002
    
    
    
    50,000
    
    
    
    
    
    
    
    27.72
    
    
    
    7/9/2012
    
    
    
    
    
    
    
    5/6/2003
    
    
    
    50,000
    
    
    
    
    
    
    
    10.00
    
    
    
    5/6/2013
    
    
    
    
    
    
    
    Richard C. Seban
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    John K. Suckow
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 1
    
    Vesting is 1/3 annually from the date of grant.2
    
    Pursuant to Mr. Jungs employment agreement, he is to receive an
equity award (one-half capital stock and one-half options) upon our
emergence from Chapter 11. At this time, the amount is not
determinable. See the discussion of his employment agreement under
Employment Agreements with Named Executive Officers.3
    
    Mr. Hutchison was granted a restricted stock award of 20,000 shares on
July 13, 2004. The restricted stock, which vested ratably over a
three-year term, was granted under our 1996 Plan. Subsequent to year
end but prior to the vesting date, or July 13, 2007, Mr. Hutchison
elected to disclaim ownership of the shares included above. Option Exercises and Stock Vested
  PENSION BENEFITSPresent Value ofNumber of Years
    
    Accumulated
    
    Payments DuringCredited Service
    
    Benefit
    
    Last Fiscal YearName
    
    Plan Name
    
    (#)
    
    ($)
    
    ($)Craig D. Jung
    
    
    
    
    
    
    
    
    
    
    
    Antonio C. Alvarez II
    
    
    
    
    
    
    
    
    
    
    
    Ronald B. Hutchison
    
    Supplemental
Executive
Retirement Plan
    
    
    0
    
    
    
    24,632
    
    
    Michael D. Kafoure
    

Supplemental
Executive
Retirement Plan
    
    
    9
    
    
    
    895,483
    
    
    Richard C. Seban
    
    
    
    
    
    
    
    
    
    
    
    John J. Suckow
    
    
    
    
    
    
    
    
    
    
    
    
 IBC Supplemental Executive Retirement Plan
  118




---



##### 



Potential Payments upon Termination or Change in Control
 Mr. Jungs Employment Agreement
  119




---



##### 



Mr. Kafoures Employment Agreement
   Management Continuity Agreements
  
    
    an amount equal to 2 years of salary (based on his monthly
base salary immediately prior to the Change in
 120




---



##### 



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 2 years following the employment termination date;
    
    immediate and full vesting under our SERP and at least 2
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.
     Mr. Sebans Offer of Employment
  121




---



##### 



Compensation of Directors
  Fees Earned or Paid in Cash1Name
    
    ($)Michael J. Anderson
    
    $
    122,855G. Kenneth Baum 2
    
    
    48,094Leo Benatar 2
    
    
    114,785Robert B. Calhoun
    
    
    100,230Frank E. Horton 2
    
    
    60,357Richard M. Metrick 2
    
    
    52,107William P. Mistretta
    
    
    76,344David I. Pauker 3
    
    
    43,648Terry R. Peets 3
    
    
    42,578Ronald L. Thompson 2
    
    
    54,857Philip A. Vachon 3
    
    
    28,455David N. Weinstein 2
    
    
    54,040
 
 1
    
    The fees include Board and Committee retainers and attendance fees (see below) earned during fiscal
2007. We also pay an orientation fee of $1,000 per day for new directors to visit one of our bakeries, ride
a route and meet with senior management. During fiscal 2007, the Board met 27 times (15 of which were
telephonic), the Audit Committee met 20 times (12 of which were telephonic), the Compensation Committee met
12 times (5 of which were telephonic), the Nominating/Corporate Governance Committee met 5 times (1 of which
was telephonic), and the Executive Committee met 1 time, which was telephonic.2
    
    Messrs. Baum, Benatar, Horton, Metrick, and Thompson departed from the Board in January 2007 as a result
of a Bankruptcy Court approved settlement among us and our various constituency groups to reconstitute our
Board. In connection with their departure from the Board, Messrs. Baum, Benatar, Horton, Metrick and
Thompson disclaimed their rights in 4,525 shares of stock that, pursuant to a grant of phantom stock units
on July 13, 2004, were to be issued upon their departure. Mr. Weinstein resigned from the Board in January
2007.3
    
    Messrs. Pauker and Peets joined the Board in January 2007. Mr. Vachon joined the Board in February 2007.  FORM OF COMPENSATION
    
    AMOUNT OF COMPENSATIONJune 2006  December 2007
    
    January  May 2007Chairman of the Board Retainer
    
    $
    150,000
    
    
    $
    150,000Annual Retainer
    
    
    30,000
    
    
    
    75,000Annual Retainer for Audit Committee Chairman
    
    
    5,000
    
    
    
    15,000Annual Retainer for Other Committee Chairmen
    
    
    2,500
    
    
    
    7,500Board Attendance Fee (each meeting)In Person
    
    
    2,000
    
    
    
    2,000Telephonic
    
    
    1,000
    
    
    
    1,000Committee Attendance Fee (each meeting)In Person (same day as Board Meeting)
    
    
    750
    
    
    
    750In Person (not same day as Board Meeting)
    
    
    1,000
    
    
    
    1,000Telephonic
    
    
    500
    
    
    
    500
 122




---



##### 



Name
    
    Options OutstandingMichael J. Anderson
    
    
    58,000Robert B. Calhoun
    
    
    80,000
 Compensation Committee Interlocks and Insider Participation
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 Equity Compensation Plan Information
  Equity Compensation Plan Information
 Weighted-
    
    Number of securitiesaverage
    
    remaining availableexercise
    
    forprice of
    
    future issuance underNumber of securities to be
    
    outstanding
    
    equity compensationissued upon exercise of
    
    options,
    
    plans (excludingoutstanding options,
    
    warrants
    
    securities reflected inwarrants and rights
    
    and rights
    
    column (a))Equity compensation plans approved by security holders
    
    
    3,273,000
    
    
    $
    15.69
    
    
    
    9,198,000Equity compensation plans not approved by security holders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    3,273,000
    
    
    $
    15.69
    
    
    
    9,198,000
 123




---



##### 



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
    
    Fidelity Management & Research Co.1
82 Devonshire Street
Boston, MA 02109
    
    
    6,492,816
    
    
    
    14.338
    %Common
    
    Eagle Rock Capital Management, L.L.C.1
551 Fifth Avenue, 34th Floor
New York, NY 10176
    
    
    4,013,176
    
    
    
    8.800
    %Common
    
    Brencourt Advisors, LLC1
600 Lexington Avenue, 8th Floor
New York, NY 10022
    
    
    3,799,520
    
    
    
    8.390
    %Common
    
    QVT Financial LP1
527 Madison Avenue, 8th Floor
New York, NY 10022
    
    
    3,322,495
    
    
    
    7.320
    %Common
    
    Glenview Capital Management, LLC1
399 Park Avenue, Floor 39
New York, NY 10022
    
    
    3,136,008
    
    
    
    6.900
    %Common
    
    Morgan Stanley 1
1585 Broadway
New York, NY 10036
    
    
    2,990,741
    
    
    
    6.600
    %Common
    
    Brandes Investment Partners, L.P.1
11988 El Camino Real, Suite 500
San Diego, CA 92130
    
    
    2,958,045
    
    
    
    6.500
    %
 
 1
    
    The information concerning beneficial ownership was obtained from
Schedule 13G reports of Fidelity Management & Research Co., Eagle
Rock Capital Management, L.L.C., Brencourt Advisors, LLC, QVT
Financial LP, Glenview Capital Management, LLC, Morgan Stanley and
Brandes Investment Partners, L.P., filed with the Securities and
Exchange Commission (SEC) on January 10, 2007, February 14, 2006,
February 15, 2007, February 14, 2005, February 14, 2007, February
15, 2007 and February 16, 2006, respectively. 124




---



##### 



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
    
    64,095      1,2
    
    *Common
    
    Antonio C. Alvarez II
    
    0Common
    
    Robert B. Calhoun
    
    87,257      1,2
    
    *Common
    
    Ronald B. Hutchison
    
    0Common
    
    Craig D. Jung
    
    0Common
    
    Michael D. Kafoure
    
    415,844      ,2
    
    *Common
    
    William P. Mistretta
    
    0Common
    
    David I. Pauker
    
    0Common
    
    Terry R. Peets
    
    0Common
    
    Richard C. Seban
    
    0Common
    
    John K. Suckow
    
    0Common
    
    Philip A. Vachon
    
    0Common
    
    All Named Executive
Officers, directors and
executive officers as a
group (19 persons)
    
    873,677      1,2
    
    1.9%
 
 *
    
    Less than 1%1
    
    Of the shares indicated, 58,000 (Mr. Anderson), 80,000
(Mr. Calhoun), 410,000 (Mr. Kafoure) and 834,000 (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, 4,525 (Messrs. Anderson and
Calhoun) and 20,120 (all directors, Named Executive
Officers and executive officers as a group) are
attributable to shares of restricted stock in the case
of the executive officers and phantom stock units in
the case of the directors. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Transactions with Related Persons
  125




---



##### 



Review of Transactions with Related Persons
  Director Independence
   126




---



##### 



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
  Audit
 Audit-Related
 Tax
 Other Fees
 127




---



##### 



128




---



##### 



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
  1. Financial StatementsThe following consolidated financial statements are set forth in Part II, Item 8:Consolidated Balance Sheets at June 2, 2007 and June 3, 2006For the
52 weeks ended June 2, 2007, the 53 weeks ended June 3, 2006 and the 52 weeks
ended May 28, 2005:Consolidated Statements of OperationsConsolidated Statements of Cash FlowsConsolidated Statements of Stockholders Equity (Deficit)Notes to Consolidated Financial Statements2. Financial Statement ScheduleSchedule II on page 138 is filed as part of this Annual Report.All other schedules have been omitted since the required information is not present or not
present in amounts sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial statements or the notes
thereto.3. Exhibits
 129




---



##### 



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).3.1.1
    
    Certificate of Amendment to the Restated Certificate of
Incorporation of Interstate Bakeries Corporation
(incorporated herein by reference to Exhibit 3.1 to
Interstate Bakeries Corporations Form 8-K filed on March
21, 2007).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).3.2.1
    
    Amendment Number One to the Restated Bylaws of Interstate
Bakeries Corporation (incorporated herein by reference to
Exhibit 3.2 to Interstate Bakeries Corporations Form 8-K
filed on March 21, 2007).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 by and among Interstate Bakeries
Corporation, Interstate Brands Corporation and Craig D.
Jung, dated January 30, 2007 (incorporated herein by
reference to Exhibit 10.1 to Interstate Bakeries
Corporations Form 8-K filed on January 31, 2007).#10.2
    
    Employment Agreement, dated as of April 25, 2007, by and
among Interstate Brands Corporation, Interstate Bakeries
Corporation and Kent B. Magill (incorporated herein by
reference to Exhibit 10.1 to Interstate Bakeries
Corporations Form 8-K filed on June 6, 2007).#10.3
    
    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).#10.3.1
    
    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).#10.4
    
    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).#
 130




---



##### 



Exhibit No.
    
    Exhibit10.7
    
    Form of Management Continuity Agreement effective as of
February 3, 2003 by and between Interstate Bakeries
Corporation and Michael D. Kafoure, Kent B. Magill, Robert
P. Morgan and Richard D. Willson (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).#10.8
    
    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).10.9.1
    
    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).10.9.2
    
    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).10.9.3
    
    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).10.9.4
    
    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).10.9.5
    
    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).10.9.6
    
    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).
 131




---



##### 



Exhibit No.
    
    Exhibit10.9.7
    
    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).10.10
    
    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).10.11
    
    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).#10.12
    
    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).#10.13
    
    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).#10.14
    
    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).#10.14.1
    
    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).#10.15
    
    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).#10.16
    
    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).#10.17
    
    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).10.18
    
    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).10.19
    
    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).
 132




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##### 



Exhibit No.
    
    Exhibit10.20
    
    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).#10.20.1
    
    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).#10.21
    
    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).10.21.1
    
    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).10.21.2
    
    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
 133




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##### 



Exhibit No.
    
    Exhibitarranger 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).10.21.3
    
    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).10.21.4
    
    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).10.21.5
    
    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).10.21.6
    
    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
 134




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##### 



Exhibit No.
    
    ExhibitDelaware
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).10.21.7
    
    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).10.21.8
    
    Eighth Amendment, dated as of August 25, 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).10.21.9
    
    Ninth Amendment, dated as of February 16, 2007, 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 February 16, 2007).10.22
    
    Offer of Employment dated July 13, 2005 between Interstate Bakeries
Corporation and Mr.
 135




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##### 



Exhibit No.
    
    ExhibitRichard C. Seban (incorporated herein by
reference to the Current Report on Form 8-K of Interstate Bakeries
Corporation filed on August 5, 2005).#10.23
    
    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).#10.24
    
    Fiscal 2007 Management Incentive Plan (incorporated herein by
reference to Exhibit 10.1 to the Current Report on Form 8-K of
Interstate Bakeries Corporation filed on August 14, 2007). #21.1
    
    Subsidiaries of Interstate Bakeries Corporation.*24.1
    
    Power of Attorney (included on signature page).31.1
    
    Certification of Craig D. Jung pursuant to Rule 13a-14(a)/15d-14(a)*31.2
    
    Certification of J. Randall Vance pursuant to Rule 13a-14(a)/15d-14(a)*32.1
    
    Certification of Craig D. Jung pursuant to 18 U.S.C. Section 1350*32.2
    
    Certification of J. Randall Vance 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 136




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##### 



SIGNATURES
  INTERSTATE BAKERIES CORPORATIONDated:   August 15, 2007
    By:
    /s/ Craig D. JungCraig D. JungChief Executive Officer
(Principal Executive Officer)   Name of Signatory
    
    Capacities In Which Signing
    
    Date/s/ Craig D. Jung

Craig D. Jung
    
    Chief Executive Officer (Principal Executive Officer) and Director
    
    August 15, 2007/s/ J. Randall Vance

J. Randall Vance
    
    Chief Financial Officer (Principal Financial and Accounting
Officer)
    
    August 15, 2007/s/ Michael J. Anderson

Michael J. Anderson
    
    Non-Executive Chairman of the Board
    
    August 15, 2007/s/ Robert B. Calhoun

Robert B. Calhoun
    
    Director
    
    August 15, 2007/s/ William P. Mistretta

William P. Mistretta
    
    Director
    
    August 15, 2007/s/ David I. Pauker

David I. Pauker
    
    Director
    
    August 15, 2007/s/ Terry R. Peets

Terry R. Peets
    
    Director
    
    August 15, 2007/s/ Philip A. Vachon

Philip A. Vachon
    
    Director
    
    August 15, 2007
 137




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##### 



INTERSTATE BAKERIES CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FIFTY-TWO WEEKS ENDED JUNE 2, 2007,
FIFTY-THREE WEEKS ENDED JUNE 3, 2006,
AND FIFTY-TWO WEEKS ENDED MAY 28, 2005  (dollars in thousands)
 Adjustments toBalance at
    
    
    
    
    
    other
    
    Accounts
    
    Balance atbeginning
    
    Adjustments
    
    comprehensive
    
    charged
    
    endDescription
    
    of period
    
    to expense
    
    income
    
    off
    
    of period2007Reserve for discounts and allowances on
accounts receivable
    
    $
    8,914
    
    
    $
    (215
    )
    
    $
    
    
    
    $
    
    
    
    $
    8,699Allowance for doubtful accounts
    
    
    3,400
    
    
    
    (798
    )
    
    
    
    
    
    
    (287
    )
    
    
    2,315Deferred income tax  valuation allowance
    
    
    98,193
    
    
    
    36,235
    
    
    
    (11,147
    )
    
    
    
    
    
    
    123,2812006Reserve for discounts and allowances on
accounts receivable
    
    
    6,510
    
    
    
    2,404
    
    
    
    
    
    
    
    
    
    
    
    8,914Allowance for doubtful accounts
    
    
    3,492
    
    
    
    387
    
    
    
    
    
    
    
    (479
    )
    
    
    3,400Deferred income tax  valuation allowance
    
    
    62,165
    
    
    
    37,424
    
    
    
    (1,396
    )
    
    
    
    
    
    
    98,1932005Reserve for discounts and allowances on
accounts receivable
    
    
    3,839
    
    
    
    2,671
    
    
    
    
    
    
    
    
    
    
    
    6,510Allowance for doubtful accounts
    
    
    3,700
    
    
    
    2,032
    
    
    
    
    
    
    
    (2,240
    )
    
    
    3,492Deferred income tax  valuation allowance
    
    
    
    
    
    
    61,090
    
    
    
    1,075
    
    
    
    
    
    
    
    62,165
 138