UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended May 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-11165
 INTERSTATE BAKERIES CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    43-1470322(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)12 East Armour Boulevard,Kansas City, Missouri
    
    64111(Address of principal executive offices)
    
    (Zip Code)
 (816) 502-4000
Registrants telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value
Preferred Stock Purchase Rights
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Large accelerated filer
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    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company
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   DOCUMENTS INCORPORATED BY REFERENCE: None




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INDEX
 Page NumberFORWARD-LOOKING STATEMENTS
    
    
    1PART I
    
    
    5ITEM 1. BUSINESS
    
    
    5ITEM 1A. RISK FACTORS
    
    
    13ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    24ITEM 2. PROPERTIES
    
    
    24ITEM 3. LEGAL PROCEEDINGS
    
    
    24ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    27PART II
    
    
    28ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    28ITEM 6. SELECTED FINANCIAL DATA
    
    
    30ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    32ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    48ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    49ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
    
    
    99ITEM 9A. CONTROLS AND PROCEDURES
    
    
    99ITEM 9B. OTHER INFORMATION
    
    
    100PART III
    
    
    101ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    101ITEM 11. EXECUTIVE COMPENSATION
    
    
    104ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    108ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
    
    
    109ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    111PART IV
    
    
    113ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
    
    
    113




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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;
    
    our ability to operate pursuant to the covenants, terms and certifications of the DIP Facility;
    
    our ability to successfully negotiate an extension and increase in the amount available under, or
refinance, our DIP Facility, if needed, which expires on February 9, 2009;
    
    our ability to consummate the Second Amended Plan (as defined below), if confirmed by the Bankruptcy
Court;
    
    our ability to implement our business plan developed as a basis for one or more plans of
reorganization, including the Second Amended Plan;
    
    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 in to the
Chapter 11 proceeding;
    
    our ability to obtain the financing necessary to implement our business plan and emerge from Chapter 11;
    
    risks associated with third parties seeking and obtaining court approval 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
initiatives implemented by our CEO;
    
    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 manage our exposure to price increases with respect to various
ingredients and energy through our hedging strategies and our ability to hedge given our financial
condition;
    
    our ability to attract, motivate and/or retain key executives and employees;
    
    changes in our relationship with employees and the unions that represent them;
 1




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
    
    successful implementation of information technology improvements;
    
    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;
 
    
    the continuing effects of changes in consumers eating habits and dietary preferences;
    
    the performance of 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
 
    
    the continued evaluation of various alternatives, including, but not limited to, the sale of the
Company or some or all of our assets, infusion of capital, debt restructuring, amending the plan
of reorganization previously filed with the Bankruptcy Court, filing a new plan of reorganization,
or any combination of these options;
    
    our ability to formulate a rational strategy for maximizing value of the bankruptcy estates,
including a sale of the Company and/or its assets in its entirety or in a series of transactions;
    
    the terms of any reorganization plan ultimately confirmed;
    
    our ability to implement our business plan developed as a basis for one or more plans of
reorganization, including the Second Amended Plan;
    
    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 is and will be required by management to structure and implement the
Second Amended Plan, as well as to continue to evaluate various alternatives in the event the
Second Amended Plan is not confirmed by the Bankruptcy Court, including, but not limited to, the
sale of the Company or 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
 2




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
    
    the duration of the Chapter 11 process.
 General Factors
 
    
    the availability of capital on acceptable terms in light of the various factors discussed herein,
including our reorganization under the Chapter 11 process;
    
    the availability and cost of raw materials, packaging, fuels and utilities, and the ability to recover
these costs in the pricing of products, improved efficiencies and other strategies;
    
    increased pension, health care, workers compensation and other employee costs;
    
    actions of competitors, including pricing 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 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;
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
    
    unexpected costs or delays incurred in connection with 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 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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7




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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
   8




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Products and Brands
  Category
    
    Our National Brands
    
    Our Regional BrandsBreads, Buns and Rolls
    
    Wonder
    
    Bunny*(White, variety, crusty, reduced-calorie and bagels)
    
    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
    
    Drakes(Donuts, sweet rolls, snack pies and snack cakes)
    
    Twinkies
    
    Devil DogsDing Dongs
    
    Ring DingsHoHos
    
    YodelsSuzy-Qs
    
    Yankee Doodles100 Calorie Packs
    
    ZingersDolly MadisonOther
    
    Mrs. Cubbisons(Croutons and stuffing mix)
    
    Marie Callenders*
 
 *
    
    Licensed brands   Marketing and Distribution
  9




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Competition
  10




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Sources and Availability of Raw Materials
   Employees
  Governmental Regulation; Environmental Matters
   11




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12




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Availability of Reports; Website Access
  
 ITEM 1A. RISK FACTORS
  We face significant challenges and uncertainties in connection with (i) the
implementation of our business plan, (ii) the outcome of our efforts to maximize value of the
bankruptcy estates, and (iii) the development of a new or revised plan of reorganization.
      13




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14




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We face uncertainty regarding the adequacy of our capital resources, including liquidity,
and have limited access to additional financing.
       Terms of collective bargaining agreements and labor disruptions could adversely impact our
results of operations.
  15




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The Chapter 11 process and the DIP Facility impose restrictions on the conduct of our
business.
     Our financial statements assume we can continue as a going concern.
   16




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Our reorganization will require substantial effort by management and may impact our ability to
attract, retain and compensate key personnel.
  The inability to completely withdraw from the ABA Plan while operating under the provisions of
Chapter 11 of the Bankruptcy Code could jeopardize our ability to emerge from bankruptcy and
threaten our viability if we emerge.
    17




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We may have difficulty in maintaining relationships and material contracts with our
suppliers.
  Increases in prices and shortages of raw materials, fuels and utilities could cause our
costs to increase.
   Price increases and other factors could reduce demand for our products and declining
demand for our products could have adverse effects on our financial results.
  Dietary Guidelines for
Americans
 18




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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.
   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 May 31, 2008 and
weaknesses in our internal controls and procedures could adversely affect our financial condition.
  19




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Increases in employee and employee-related costs could have adverse effects on our
financial results.
  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.
   20




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21




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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.
  22




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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.
  23




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ITEM 1B. UNRESOLVED STAFF COMMENTS.
  
 ITEM 2. PROPERTIES
 Bakeries
  Birmingham, Alabama
    
    Indianapolis, Indiana
    
    Rocky Mount, North CarolinaAnchorage, Alaska
    
    Waterloo, Iowa
    
    Akron, OhioLos Angeles, California (2)
    
    Emporia, Kansas
    
    Cincinnati, OhioOakland, California
    
    Lenexa, Kansas
    
    Columbus, OhioSacramento, California
    
    Alexandria, Louisiana
    
    Defiance, OhioDenver, Colorado
    
    Biddeford, Maine
    
    Northwood, OhioJacksonville, Florida
    
    Boonville, Missouri
    
    Tulsa, OklahomaOrlando, Florida
    
    Springfield, Missouri
    
    Philadelphia, PennsylvaniaColumbus, Georgia
    
    St. Louis, Missouri
    
    Knoxville, TennesseeDecatur, Illinois
    
    Billings, Montana
    
    Memphis, TennesseeHodgkins, Illinois
    
    Henderson, Nevada
    
    Ogden, UtahPeoria, Illinois
    
    Wayne, New Jersey
    
    Salt Lake City, UtahSchiller Park, Illinois
    
    Jamaica, New York
    
    Seattle, WashingtonColumbus, Indiana
 Other Properties
  
 ITEM 3. LEGAL PROCEEDINGS
   24




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25




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Accounting for Contingencies
 26




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  27




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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
    
    Low2008
    
    
    1
    
    
    $
    3.00
    
    
    $
    1.002
    
    
    
    1.25
    
    
    
    0.043
    
    
    
    0.07
    
    
    
    0.014
    
    
    
    0.12
    
    
    
    0.022007
    
    
    1
    
    
    $
    8.45
    
    
    $
    4.602
    
    
    
    5.20
    
    
    
    2.503
    
    
    
    3.60
    
    
    
    2.114
    
    
    
    4.00
    
    
    
    2.55
    28




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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 3-June 30, 2007
    
    
    4
    
    
    $
    2.90
    
    
    
    4
    
    
    
    7,396,627Period 2
July 1-July 28, 2007
    
    
    3
    
    
    $
    2.30
    
    
    
    3
    
    
    
    7,396,624Period 3

July 29-Aug 25, 2007
    
    
    2
    
    
    $
    1.30
    
    
    
    2
    
    
    
    7,396,622Period 4

Aug 26-Sept 22, 2007
    
    
    4
    
    
    $
    1.14
    
    
    
    4
    
    
    
    7,396,618Period 5

Sept 23-Oct 20, 2007
    
    
    2
    
    
    $
    0.50
    
    
    
    2
    
    
    
    7,396,616Period 6

Oct 21-Nov 17, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,616Period 7

Nov 18-Dec 15, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,616Period 8

Dec 16, 2006-Jan 12, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,616Period 9

Jan 13-Feb 9, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,616Period 10

Feb 10-March 8, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,616Period 11

March 9-April 5, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,616Period 12

April 6-May 3, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,616Period 13

May 4-May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,396,616Total
    
    
    15
    
    
    $
    1.77
    
    
    
    15
    
    
    
    7,396,616
 
 (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 May 31, 2008, 7,396,616 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. 29




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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 EndedMay 31,
    
    
    June 2,
    
    
    June 3,
    
    
    May 28,
    
    
    May 29,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(1)
    
    
    (3)(4)
    
    
    (5)
    
    
    (7)(8)
    
    
    (9)(dollars and shares in thousands, except per share data)Statements of OperationsNet sales
    
    $
    2,798,337
    
    
    $
    2,917,268
    
    
    $
    3,060,473
    
    
    $
    3,403,505
    
    
    $
    3,467,562Cost of products sold (exclusive of depreciation
and amortization) (2)
    
    
    1,440,609
    
    
    
    1,489,019
    
    
    
    1,552,731
    
    
    
    1,724,054
    
    
    
    1,733,303Operating income (loss)
    
    
    (64,572
    )
    
    
    (39,641
    )
    
    
    (56,368
    )
    
    
    (335,536
    )
    
    
    (18,326
    )% of net sales
    
    
    (2.3
    )%
    
    
    (1.4
    )%
    
    
    (1.8
    )%
    
    
    (9.8
    )%
    
    
    (0.5
    )%Income (loss) before cumulative effect of
accounting change
    
    $
    (143,684
    )
    
    $
    (112,848
    )
    
    $
    (127,300
    )
    
    $
    (379,280
    )
    
    $
    (33,370
    )Cumulative effect of accounting change (6)
    
    
    
    
    
    
    
    
    
    
    (1,017
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (143,684
    )
    
    $
    (112,848
    )
    
    $
    (128,317
    )
    
    $
    (379,280
    )
    
    $
    (33,370
    )% of net sales
    
    
    (5.1
    )%
    
    
    (3.9
    )%
    
    
    (4.2
    )%
    
    
    (11.1
    )%
    
    
    (1.0
    )%Income (loss) per share before cumulative effect
of accounting change:Basic and diluted
    
    $
    (3.18
    )
    
    $
    (2.50
    )
    
    $
    (2.82
    )
    
    $
    (8.43
    )
    
    $
    (0.74
    )Common stock dividends per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.21Weighted average common shares outstanding:Basic and diluted
    
    
    45,195
    
    
    
    45,171
    
    
    
    45,124
    
    
    
    45,010
    
    
    
    44,868Balance SheetsTotal assets
    
    $
    958,357
    
    
    $
    1,081,392
    
    
    $
    1,253,055
    
    
    $
    1,398,650
    
    
    $
    1,673,797Long-term debt, excluding current maturities (10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,362Stockholders equity (deficit)
    
    
    (461,714
    )
    
    
    (318,741
    )
    
    
    (240,583
    )
    
    
    (116,924
    )
    
    
    261,708
 
 (1)
    
    Fiscal 2008 operating loss includes net restructuring charges of approximately $5.7 million relating to a sales reorganization to improve
the structure and efficiency of the sales and route delivery of our baked goods and the closure of four bakeries and the consolidation of
related depots and routes in conjunction with exiting the Southern California bread market; and property and equipment impairment of
approximately $10.5 million related to the closing of the four bakeries.(2)
    
    Depreciation and amortization excluded from cost of products sold amounted to approximately $50.4 million, $51.0 million, $59.7 million,
$70.2 million, and $71.6 million in fiscal 2008, 2007, 2006, 2005, and 2004, respectively.(3)
    
    Fiscal 2007 operating loss includes net restructuring credits of approximately $4.1 million relating to gains realized on the sale of
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.(4)
    
    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.(5)
    
    Fiscal 2006 operating loss includes net restructuring credits of approximately $27.2 million relating to gains realized on the sale of
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.(6)
    
    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. 30




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##### 



(7)
    
    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 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.(8)
    
    Fiscal 2005 net loss includes a tax valuation allowance adjustment of $5.6 million related to deferred tax assets originating in prior years.(9)
    
    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.(10)
    
    At May 31, 2008, we included our Senior Secured Credit Facility in liabilities subject to compromise. See Note 7. Debt to our consolidated
financial statements regarding this reclassification. In all prior years presented, we have reflected the total amount due under our Senior
Secured Credit Facility 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. 31




---



##### 



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 COMPANY OVERVIEW
        OVERVIEW OF CERTAIN TRENDS AND EVENTS AFFECTING OPERATIONS, FINANCIAL POSITION AND LIQUIDITY
  32




---



##### 



33




---



##### 



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  34




---



##### 



Accounting and Financial Reporting Under Statement of Position 90-7
 Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
  Reserves for Self-Insurance and Postretirement Benefits
   Pension Obligations
  35




---



##### 



Long-lived Assets
      Restructuring (Credits) Charges
   36




---



##### 



Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Accounting for Income Taxes
 Legal Reserves
  Environmental Liabilities
  NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
  37




---



##### 



RESULTS OF OPERATIONS
  Fifty-Two
    
    Fifty-Two
    
    Fifty-ThreeWeeks Ended
    
    Weeks Ended
    
    Weeks EndedMay 31,
    
    June 2,
    
    June 3,2008
    
    2007
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of products sold (exclusive of items shown below)
    
    
    51.5
    
    
    
    51.0
    
    
    
    50.7Selling, delivery and administrative expenses
    
    
    47.7
    
    
    
    47.7
    
    
    
    49.1Restructuring charges (credits)
    
    
    0.2
    
    
    
    (0.1
    )
    
    
    (0.9
    )Depreciation and amortization
    
    
    2.4
    
    
    
    2.5
    
    
    
    2.5Loss on sale or abandonment of assets
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.2Property and equipment impairment
    
    
    0.4
    
    
    
    
    
    
    
    0.2Operating income (loss)
    
    
    (2.3
    )
    
    
    (1.4
    )
    
    
    (1.8
    )Interest expense
    
    
    1.7
    
    
    
    1.7
    
    
    
    1.7Reorganization charges, net
    
    
    1.5
    
    
    
    1.1
    
    
    
    1.2Other (income) loss
    
    
    
    
    
    
    
    
    
    
    Income (loss) before income taxes and cumulative effect of
accounting change
    
    
    (5.5
    )
    
    
    (4.2
    )
    
    
    (4.7
    )Provision (benefit) for income taxes
    
    
    (0.4
    )
    
    
    (0.3
    )
    
    
    (0.5
    )Income (loss) before cumulative effect of accounting change
    
    
    (5.1
    )
    
    
    (3.9
    )
    
    
    (4.2
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    (5.1)
    %
    
    
    (3.9)
    %
    
    
    (4.2)
    %
 Reportable Segments
     38




---



##### 



Fiscal 2008 Compared to Fiscal 2007
 Net Sales
(dollars in thousands)
 Fifty-Two Weeks Ended
    
    
    Fifty-Two Weeks Ended
    
    
    %May 31, 2008
    
    
    June 2, 2007
    
    
    Increase /Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    (Decrease)Route sales
    
    $
    2,425,611
    
    
    
    86.7
    %
    
    $
    2,544,777
    
    
    
    87.2
    %
    
    
    (4.7)
    %Outlet sales
    
    
    296,659
    
    
    
    10.6
    
    
    
    322,860
    
    
    
    11.1
    
    
    
    (8.1
    )Direct sales
    
    
    76,067
    
    
    
    2.7
    
    
    
    49,631
    
    
    
    1.7
    
    
    
    53.3Total net sales
    
    $
    2,798,337
    
    
    
    100.0
    %
    
    $
    2,917,268
    
    
    
    100.0
    %
    
    
    (4.1
    )
 Consolidated Net Sales
  Route net sales.
 Outlet net sales.
 Direct net sales.
 Gross Profit (Exclusive of Depreciation and Amortization)
  39




---



##### 



Selling, Delivery and Administrative Expenses
  Restructuring Charges
   Property and Equipment Impairment
  Operating Income (Loss)
(dollars in thousands)
 Fifty-Two Weeks Ended
    
    
    Fifty-Two Weeks Ended
    
    
    %May 31, 2008
    
    
    June 2, 2007
    
    
    Increase /Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    (Decrease)Segment Income (Loss)Route sales
    
    $
    11,060
    
    
    
    (17.1)
    %
    
    $
    28,798
    
    
    
    (72.6)
    %
    
    
    (61.6)
    %Outlet sales
    
    
    21,007
    
    
    
    (32.5
    )
    
    
    10,902
    
    
    
    (27.5
    )
    
    
    92.7Direct sales
    
    
    6,773
    
    
    
    (10.5
    )
    
    
    3,595
    
    
    
    (9.1
    )
    
    
    88.4Total segment income (loss)
    
    
    38,840
    
    
    
    (60.1
    )
    
    
    43,295
    
    
    
    (109.2
    )
    
    
    (10.3
    )Corporate
    
    
    (103,412
    )
    
    
    160.1
    
    
    
    (82,936
    )
    
    
    209.2
    
    
    
    (24.7
    )Total operating income (loss)
    
    $
    (64,572
    )
    
    
    100.0
    %
    
    $
    (39,641
    )
    
    
    100.0
    %
    
    
    (62.9
    )
 40




---



##### 



Consolidated Operating Income (Loss)
  Route operating income
 Outlet operating income.
 Direct operating income.
 Reorganization Charges
   Interest Expense
  41




---



##### 



Provision (Benefit) for Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109
 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)Route sales
    
    $
    2,544,777
    
    
    
    87.2
    %
    
    $
    2,661,465
    
    
    
    87.0
    %
    
    
    (4.4)
    %Outlet sales
    
    
    322,860
    
    
    
    11.1
    
    
    
    358,722
    
    
    
    11.7
    
    
    
    (10.0
    )Direct sales
    
    
    49,631
    
    
    
    1.7
    
    
    
    40,286
    
    
    
    1.3
    
    
    
    23.2Total net sales
    
    $
    2,917,268
    
    
    
    100.0
    %
    
    $
    3,060,473
    
    
    
    100.0
    %
    
    
    (4.7
    )
 Consolidated Net Sales
  Route net sales. rd
 Outlet net sales. rd
 Direct net sales rd
 42




---



##### 



Gross Profit (Exclusive of Depreciation and Amortization)
  Selling, Delivery and Administrative Expenses
  Restructuring Charges
   Property and Equipment Impairment
  43




---



##### 



Operating Income (Loss)
(dollars in thousands)
 Fifty-Two Weeks Ended
    
    
    Fifty-Three Weeks Ended
    
    
    %June 2, 2007
    
    
    June 3 2006
    
    
    Increase /Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    (Decrease)Segment Income (Loss)Route sales
    
    $
    28,798
    
    
    
    (72.6)
    %
    
    $
    (11,747
    )
    
    
    20.8
    %
    
    
    345.2
    %Outlet sales
    
    
    10,902
    
    
    
    (27.5
    )
    
    
    10,682
    
    
    
    (18.9
    )
    
    
    2.1Direct sales
    
    
    3,595
    
    
    
    (9.1
    )
    
    
    4,394
    
    
    
    (7.8
    )
    
    
    (18.2
    )Total segment income (loss)
    
    
    43,295
    
    
    
    (109.2
    )
    
    
    3,329
    
    
    
    (5.9
    )
    
    
    1,200.5Corporate
    
    
    (82,936
    )
    
    
    209.2
    
    
    
    (59,697
    )
    
    
    105.9
    
    
    
    (38.9
    )Total operating income (loss)
    
    $
    (39,641
    )
    
    
    100.0
    %
    
    $
    (56,368
    )
    
    
    100.0
    %
    
    
    29.7
 Consolidated Operating Income (Loss)
  Route operating income
 Outlet operating income.
 Direct operating income.
 Reorganization Charges
   44




---



##### 



Interest Expense
  Provision (Benefit) for Income Taxes
  CASH RESOURCES AND LIQUIDITY
 CASH FLOWS
  Cash Provided By (Used In) Operating Activities
  Cash Provided By (Used In) Investing Activities
  45




---



##### 



Cash Provided By (Used In) Financing Activities
  SOURCES OF LIQUIDITY AND CAPITAL
      46




---



##### 



DIP Facility
        47




---



##### 



OFF-BALANCE SHEET FINANCING
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  48




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 INDEX TO FINANCIAL STATEMENTS
 PageNumberReport of Independent Registered Public Accounting Firm
    
    
    50Consolidated Balance Sheets at May 31, 2008 and June 2, 2007
    
    
    52Consolidated Statements of Operations for the 52 weeks ended May 31, 2008, 52 weeks ended June 2, 2007, and 53 weeks ended June 3, 2006
    
    
    53Consolidated Statements of Cash Flows for the 52 weeks ended May 31, 2008, 52 weeks ended June 2, 2007, and 53 weeks ended June 3, 2006
    
    
    54Consolidated Statements of Stockholders Deficit for the 52 weeks ended May 31, 2008, 52 weeks ended
June 2, 2007, and 53 weeks ended June 3, 2006
    
    
    55Notes to Consolidated Financial Statements
    
    
    561.
    
    Voluntary Chapter 11 Filing
    
    
    562.
    
    Description of Business and Significant Accounting Policies
    
    
    593.
    
    Property and Equipment
    
    
    684.
    
    Assets Held for Sale
    
    
    685.
    
    Lease Obligations
    
    
    696.
    
    Intangible Assets
    
    
    697.
    
    Debt
    
    
    708.
    
    Accrued Expenses and Other Liabilities
    
    
    739.
    
    Derivative Instruments
    
    
    7310.
    
    Liabilities Subject to Compromise
    
    
    7411.
    
    Employee Benefit Plans
    
    
    7412.
    
    Key Employee Retention Plan
    
    
    8213.
    
    Stock-Based Compensation
    
    
    8214.
    
    Restructuring Charges (Credits)
    
    
    8415.
    
    Reorganization Charges
    
    
    8916.
    
    Income Taxes
    
    
    8917.
    
    Commitments and Contingencies
    
    
    9118.
    
    Stock Repurchases
    
    
    9519.
    
    Stockholder Rights Plan
    
    
    9520.
    
    Earnings (Loss) per Share
    
    
    9521.
    
    Comprehensive Loss
    
    
    9622.
    
    Segment Information
    
    
    9723.
    
    Subsequent Event
    
    
    98
 49




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      Employers Accounting for Defined Benefit Pension and Other
 50




---



##### 



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
  
 51




---



##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED BALANCE SHEETS  (dollars in thousands, except share data)
 May 31,
    
    
    June 2,2008
    
    
    2007ASSETSCurrent assetsCash
    
    $
    25,071
    
    
    $
    67,212Restricted cash
    
    
    21,052
    
    
    
    15,085Accounts receivable, less allowance for doubtful accounts of $2,050 and $2,315, respectively
    
    
    136,627
    
    
    
    152,175Inventories
    
    
    61,837
    
    
    
    65,682Assets held for sale
    
    
    17,562
    
    
    
    2,032Other current assets
    
    
    43,995
    
    
    
    49,649Total current assets
    
    
    306,144
    
    
    
    351,835Property and equipment, net
    
    
    464,455
    
    
    
    541,725Intangible assets
    
    
    158,285
    
    
    
    160,239Other assets
    
    
    29,473
    
    
    
    27,593Total assets
    
    $
    958,357
    
    
    $
    1,081,392LIABILITIES AND STOCKHOLDERS DEFICITLiabilities not subject to compromiseCurrent liabilitiesPre-petition debt
    
    $
    2,759
    
    
    $
    451,515Post-petition debt
    
    
    63,358
    
    
    
    Accounts payable
    
    
    108,288
    
    
    
    129,137Accrued expenses
    
    
    205,411
    
    
    
    217,373Total current liabilities
    
    
    379,816
    
    
    
    798,025Other liabilities
    
    
    219,288
    
    
    
    236,766Deferred income taxes
    
    
    69,475
    
    
    
    74,789Total liabilities not subject to compromise
    
    
    668,579
    
    
    
    1,109,580Liabilities subject to compromise
    
    
    751,492
    
    
    
    290,553Stockholders 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,
45,202,000 and 45,249,000 shares outstanding, respectively
    
    
    816
    
    
    
    816Additional paid-in capital
    
    
    584,485
    
    
    
    584,503Accumulated deficit
    
    
    (403,038
    )
    
    
    (255,559
    )Treasury stock, 36,377,000 and 36,330,000 shares at cost, respectively
    
    
    (678,740
    )
    
    
    (678,721
    )Accumulated other comprehensive income
    
    
    34,763
    
    
    
    30,220Total stockholders deficit
    
    
    (461,714
    )
    
    
    (318,741
    )Total liabilities and stockholders deficit
    
    $
    958,357
    
    
    $
    1,081,392
  52




---



##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS  (dollars in thousands, except per share data)
 Fifty-Two
    
    
    Fifty-Two
    
    
    Fifty-ThreeWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedMay 31,
    
    
    June 2,
    
    
    June 3,2008
    
    
    2007
    
    
    2006Net sales
    
    $
    2,798,337
    
    
    $
    2,917,268
    
    
    $
    3,060,473Cost of products sold (exclusive of items shown below)
    
    
    1,440,609
    
    
    
    1,489,019
    
    
    
    1,552,731Selling, delivery and administrative expenses
    
    
    1,334,432
    
    
    
    1,391,388
    
    
    
    1,504,038Restructuring charges (credits)
    
    
    5,674
    
    
    
    (4,073
    )
    
    
    (27,187
    )Depreciation and amortization
    
    
    67,226
    
    
    
    71,949
    
    
    
    77,795Loss on sale or abandonment of assets
    
    
    4,495
    
    
    
    7,266
    
    
    
    4,671Property and equipment impairment
    
    
    10,473
    
    
    
    1,360
    
    
    
    4,7932,862,909
    
    
    
    2,956,909
    
    
    
    3,116,841Operating income (loss)
    
    
    (64,572
    )
    
    
    (39,641
    )
    
    
    (56,368
    )Other (income) expenseInterest expense (excluding unrecorded contractual interest expense of
$5,983, $5,983, and $6,033, respectively)
    
    
    46,374
    
    
    
    49,591
    
    
    
    52,504Reorganization charges, net
    
    
    42,719
    
    
    
    32,625
    
    
    
    37,015Other (income) expense
    
    
    (17
    )
    
    
    (1,132
    )
    
    
    (2,994
    )89,076
    
    
    
    81,084
    
    
    
    86,525Loss before income taxes and cumulative effect of accounting change
    
    
    (153,648
    )
    
    
    (120,725
    )
    
    
    (142,893
    )Provision (benefit) for income taxes
    
    
    (9,964
    )
    
    
    (7,877
    )
    
    
    (15,593
    )Loss before cumulative effect of accounting change
    
    
    (143,684
    )
    
    
    (112,848
    )
    
    
    (127,300
    )Cumulative effect of accounting change, net of income taxes of $0 (See Note 2)
    
    
    
    
    
    
    
    
    
    
    (1,017
    )Net income (loss)
    
    $
    (143,684
    )
    
    $
    (112,848
    )
    
    $
    (128,317
    )Basic and diluted income (loss) per shareIncome (loss) before cumulative effect of accounting change
    
    $
    (3.18
    )
    
    $
    (2.50
    )
    
    $
    (2.82
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    (0.02
    )Total
    
    $
    (3.18
    )
    
    $
    (2.50
    )
    
    $
    (2.84
    )
  53




---



##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
 Fifty-Two
    
    
    Fifty-Two
    
    
    Fifty-ThreeWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedMay 31,
    
    
    June 2,
    
    
    June 3,2008
    
    
    2007
    
    
    2006Operating activitiesNet income (loss)
    
    $
    (143,684
    )
    
    $
    (112,848
    )
    
    $
    (128,317
    )Depreciation and amortization
    
    
    67,226
    
    
    
    71,949
    
    
    
    77,795Provision (benefit) for deferred income taxes
    
    
    (3,031
    )
    
    
    (841
    )
    
    
    (1,681
    )Reorganization charges, net
    
    
    42,719
    
    
    
    32,625
    
    
    
    37,015Cash reorganization items
    
    
    (36,549
    )
    
    
    (36,092
    )
    
    
    (35,384
    )Non-cash bankruptcy-related (credits) charges
    
    
    2,847
    
    
    
    1,512
    
    
    
    (713
    )Non-cash interest expense  deferred debt fees
    
    
    3,466
    
    
    
    3,167
    
    
    
    6,724Non-cash restricted stock compensation (benefit) expense
    
    
    (37
    )
    
    
    341
    
    
    
    944Non-cash cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    1,017Loss (gain) on sale, write-down or abandonment of assets
    
    
    9,836
    
    
    
    2,199
    
    
    
    (30,473
    )Change in operating assets and liabilitiesAccounts receivable
    
    
    15,844
    
    
    
    (1,035
    )
    
    
    26,274Inventories
    
    
    3,845
    
    
    
    (251
    )
    
    
    4,000Other current assets
    
    
    1,335
    
    
    
    13,215
    
    
    
    5,541Accounts payable and accrued expenses
    
    
    (33,661
    )
    
    
    (10,894
    )
    
    
    (22,313
    )Long-term portion of self insurance reserves
    
    
    2,951
    
    
    
    (721
    )
    
    
    15,591Other
    
    
    (9,241
    )
    
    
    5,958
    
    
    
    (13,743
    )Net cash provided by (used in) operating activities
    
    
    (76,134
    )
    
    
    (31,716
    )
    
    
    (57,723
    )Investing activitiesPurchases of property and equipment
    
    
    (21,447
    )
    
    
    (27,880
    )
    
    
    (32,328
    )Proceeds from sale of assets
    
    
    11,324
    
    
    
    25,143
    
    
    
    90,367Restricted cash deposit
    
    
    (5,550
    )
    
    
    (18,673
    )
    
    
    (85,458
    )Restricted cash release
    
    
    
    
    
    
    89,222
    
    
    
    Acquisition and development of software assets
    
    
    (895
    )
    
    
    (2,244
    )
    
    
    Other
    
    
    35
    
    
    
    224
    
    
    
    56Net cash provided by (used in) investing activities
    
    
    (16,533
    )
    
    
    65,792
    
    
    
    (27,363
    )Financing activitiesReduction of long-term debt
    
    
    (882
    )
    
    
    (46,306
    )
    
    
    (1,067
    )Increase in pre-petition debt
    
    
    2,490
    
    
    
    3,298
    
    
    
    13,415Reduction of post-petition debt
    
    
    (4,277
    )
    
    
    
    
    
    
    Increase in post-petition debt
    
    
    67,635
    
    
    
    
    
    
    
    Stock option exercise proceeds
    
    
    
    
    
    
    
    
    
    
    101Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    (1
    )Debt fees
    
    
    (14,440
    )
    
    
    (2,034
    )
    
    
    (742
    )Net cash provided by (used in) financing activities
    
    
    50,526
    
    
    
    (45,042
    )
    
    
    11,706Net increase (decrease) in cash
    
    
    (42,141
    )
    
    
    (10,966
    )
    
    
    (73,380
    )Cash at beginning of period
    
    
    67,212
    
    
    
    78,178
    
    
    
    151,558Cash at end of period
    
    $
    25,071
    
    
    $
    67,212
    
    
    $
    78,178Cash payments (received)Interest
    
    $
    40,161
    
    
    $
    47,169
    
    
    $
    47,260Income taxes
    
    
    (6,153
    )
    
    
    (14,094
    )
    
    
    (15,705
    )Non-cash investing and financing activitiesLong-term debt reduction from lease rejections
    
    
    116
    
    
    
    359
    
    
    
    890Asset disposals from lease rejections
    
    
    93
    
    
    
    271
    
    
    
    705Convertible note conversion
    
    
    
    
    
    
    1
    
    
    
    Interest earned on restricted cash deposits
    
    
    417
    
    
    
    774
    
    
    
    895
  54




---



##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT  (dollars and shares in thousands, except per share data)
 Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    AccumulatedStock Issued    
    
    Additional
    
    
    
    
    
        Treasury Stock
    
    
    Restricted
    
    
    Other
    
    
    TotalNumber
    
    
    Par
    
    
    Paid-in
    
    
    Accumulated
    
    
    Number of
    
    
    
    
    
    
    Stock
    
    
    Comprehensive
    
    
    Stockholdersof Shares
    
    
    Value
    
    
    Capital
    
    
    Deficit
    
    
    Shares
    
    
    Cost
    
    
    Compensation
    
    
    Income (Loss)
    
    
    DeficitBalance 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
    )Comprehensive loss (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (143,684
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,510
    
    
    
    (139,174
    )Cumulative effect of
change in accounting for
uncertainty in income
taxes pursuant to FIN
No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,649
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,649
    )Cumulative effect of
change in measurement date
for pension and other
postretirement obligations
pursuant to SFAS No. 158Service cost, interest
cost, and expected
return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (113
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (113
    )Amortization of prior
service cost and net
actuarial gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    Restricted share
compensation expense
    
    
    
    
    
    
    
    
    
    
    622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    622Restricted share surrenders
    
    
    
    
    
    
    
    
    
    
    (640
    )
    
    
    
    
    
    
    (47
    )
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    (659
    )Balance May 31, 2008
    
    
    81,579
    
    
    $
    816
    
    
    $
    584,485
    
    
    $
    (403,038
    )
    
    
    (36,377
    )
    
    $
    (678,740
    )
    
    $
    
    
    
    $
    34,763
    
    
    $
    (461,714
    )
 
 (a)
    
    See Note 21. Comprehensive Loss to these consolidated financial statements for the
reconciliations of net loss to comprehensive 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




---



##### 



58




---



##### 



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
  Inventories
  59




---



##### 



May 31,
    
    
    June 2,2008
    
    
    2007(dollars in thousands)Ingredients and packaging
    
    $
    38,986
    
    
    $
    43,279Finished goods
    
    
    22,851
    
    
    
    22,403$
    61,837
    
    
    $
    65,682
 Property and Equipment
  Assets Held for Sale
  Lease Obligations
 Accounting for Leases
 Software Costs
  Intangible Assets
  60




---



##### 



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
  61




---



##### 



(dollars in thousands)Balance June 2, 2007
    
    $
    1,013Obligations incurred
    
    
    120Obligations settled
    
    
    (604
    )Accretion expense and adjustments
    
    
    168Balance May 31, 2008
    
    $
    697
 Liabilities Subject to Compromise
  Pension Obligations
   Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans
  62




---



##### 



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
  Consideration Given to a Customer
  Cost of Products Sold
  63




---



##### 



Advertising and Promotion Costs
  Shipping and Handling Costs
  Restructuring (Credits) Charges
   Reorganization Charges
  Income Taxes
  Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109
 Accounting for Income Taxes
 64




---



##### 



Stock-Based Compensation
 Share-Based
Payment Accounting for Stock-Based Compensation, Accounting for Stock
Issued to Employees
   Earnings per Share
  Related Party Transactions
   65




---



##### 



Contingencies
 Accounting for Contingencies
 Newly Adopted Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109
  Recently Issued Accounting Pronouncements
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles
 Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
 66




---



##### 



Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 Business Combinations
 The Fair Value Option for Financial Assets and
Liabilities
 Fair Value Measurements
 67




---



##### 



3. Property and Equipment
  May 31,
    
    
    June 2,2008
    
    
    2007(dollars in thousands)Land and buildings (lives ranging from 10 to 35 years)
    
    $
    359,133
    
    
    $
    390,147Machinery and equipment (lives ranging from 4 to 15 years)
    
    
    820,484
    
    
    
    865,3981,179,617
    
    
    
    1,255,545Less accumulated depreciation
    
    
    (715,162
    )
    
    
    (713,820
    )$
    464,455
    
    
    $
    541,725
      
 4. Assets Held for Sale
   68




---



##### 



5. Lease Obligations
  Fiscal Years Ending
    
    Capital Leases
    
    
    Operating Leases(dollars in thousands)2009
    
    $
    915
    
    
    $
    14,5142010
    
    
    778
    
    
    
    7,5262011
    
    
    663
    
    
    
    4,6052012
    
    
    478
    
    
    
    3,2292013
    
    
    211
    
    
    
    2,331Thereafter
    
    
    557
    
    
    
    2,852Total minimum lease payments
    
    
    3,602
    
    
    $
    35,057Amounts representing interest
    
    
    (843
    )Present value of minimum lease payments
    
    
    2,759Less: Capital lease obligations, short-term
    
    
    (2,759
    )Capital lease obligations, long-term
    
    $
    
    
 6. Intangible Assets
  69




---



##### 



May 31,
    
    
    June 2,2008
    
    
    2007(dollars in thousands)Intangible assets with indefinite lives(generally trademarks and trade names)
    
    $
    157,471
    
    
    $
    157,471Intangible assets with finite livesGross carrying amount
    
    $
    3,491
    
    
    $
    13,854Less: Accumulated amortization
    
    
    (2,677
    )
    
    
    (11,086
    )Net carrying amount
    
    $
    814
    
    
    $
    2,768
   
 7. Debt
  May 31,
    
    
    June 2,2008
    
    
    2007(dollars in thousands)SecuredPost-petition
debt
    
    $
    63,358
    
    
    $
    Pre-petition
debt
    
    
    450,248
    
    
    
    447,757Unsecured6% senior subordinated convertible notes  pre-petition
    
    
    99,999
    
    
    
    99,999Capital lease converted to pre-petition debt
    
    
    6,125
    
    
    
    6,125Capital leasesReal estate
    
    
    2,759
    
    
    
    3,758$
    622,489
    
    
    $
    557,639Balance Sheet classification:Pre-petition debt
    
    $
    2,759
    
    
    $
    451,515Post-petition debt
    
    
    63,358
    
    
    
    Liabilities subject to compromise
    
    
    556,372
    
    
    
    106,124$
    622,489
    
    
    $
    557,639
 Post-Petition
Debt
  70




---



##### 



Pre-Petition
Debt
  71




---



##### 



6% Senior Subordinated Convertible Notes
  Financial Reporting by
Entities in Reorganization under the Bankruptcy Code
 Other Matters
    72




---



##### 



8. Accrued Expenses and Other Liabilities
  May 31,
    
    June 2,2008
    
    2007(dollars in thousands)Self-insurance reserves
    
    $
    71,857
    
    
    $
    76,500Payroll, vacation and other compensation
    
    
    60,418
    
    
    
    68,760Current portion of obligations under pension
and postretirement plans (See Note 11.
Employee Benefit Plans)
    
    
    39,377
    
    
    
    40,166
  May 31,
    
    June 2,2008
    
    2007(dollars in thousands)Self-insurance reserves
    
    $
    127,926
    
    
    $
    128,487Obligations under pension, postretirement and SERP plans (See Note 11. Employee Benefit Plans)
    
    
    82,461
    
    
    
    94,893
 
 9. Derivative Instruments
       73




---



##### 



10. Liabilities Subject to Compromise
     May 31,
    
    
    June 2,2008
    
    
    2007(dollars in thousands)Accounts payable
    
    $
    130,828
    
    
    $
    130,732Taxes payable
    
    
    4,637
    
    
    
    5,741Retirement obligations (SERP and deferred compensation)
    
    
    20,200
    
    
    
    15,063Legal reserve
    
    
    14,424
    
    
    
    13,819Interest bearing debt and capital leases
    
    
    556,372
    
    
    
    106,124Other
    
    
    25,031
    
    
    
    19,074$
    751,492
    
    
    $
    290,553
   
 11. Employee Benefit Plans
  74




---



##### 



American Bakers Association Retirement Plan
       75




---



##### 



May 31,
    
    
    June 2,2008
    
    
    2007(dollars in thousands)Change in Benefit ObligationBenefit obligation at beginning of year
    
    $
    60,465
    
    
    $
    55,543Service cost
    
    
    1,016
    
    
    
    1,131Interest cost
    
    
    3,573
    
    
    
    3,364Actuarial (gain) loss
    
    
    (3,812
    )
    
    
    4,251Benefits paid and expenses
    
    
    (4,117
    )
    
    
    (3,824
    )Curtailment gain
    
    
    (302
    )
    
    
    Benefit obligation at end of year
    
    $
    56,823
    
    
    $
    60,465Change in Fair Value of Negative Plan AssetsFair value of plan assets at beginning of year
    
    $
    (7,715
    )
    
    $
    (2,750
    )Actual return on plan assets
    
    
    (816
    )
    
    
    (1,586
    )Employer contributions
    
    
    377
    
    
    
    445Benefits paid and expenses
    
    
    (4,117
    )
    
    
    (3,824
    )Fair value of negative plan assets at end of year
    
    $
    (12,271
    )
    
    $
    (7,715
    )Funded Status
    
    $
    (69,094
    )
    
    $
    (68,180
    )Amounts Recognized in the Balance SheetAccrued liabilities
    
    $
    (35,468
    )
    
    $
    (35,468
    )Other liabilities
    
    
    (33,626
    )
    
    
    (32,712
    )Net amount recognized
    
    $
    (69,094
    )
    
    $
    (68,180
    )Amounts Recognized in Accumulated Other Comprehensive Income (Loss)
    
    $
    
    
    
    $
    
  Fifty-Two
    
    Fifty-Two
    
    Fifty-ThreeWeeks
    
    Weeks
    
    WeeksEnded
    
    Ended
    
    EndedMay 31,
    
    June 2,
    
    June 3,2008
    
    2007
    
    2006Weighted-average actuarial assumptionsLiability discount rate
    
    
    6.7
    %
    
    
    6.1
    %
    
    
    6.3
    %Expense discount rate (immediate recognition)
    
    
    6.7
    %
    
    
    6.1
    %
    
    
    6.3
    %Expected return on plan assets
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.5
    %
 76




---



##### 



Fifty-Two
    
    
    Fifty-Two
    
    
    Fifty-ThreeWeeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    EndedMay 31,
    
    
    June 2,
    
    
    June 3,2008
    
    
    2007
    
    
    2006(dollars in thousands)Service cost
    
    $
    1,016
    
    
    $
    1,131
    
    
    $
    1,579Interest cost
    
    
    3,573
    
    
    
    3,364
    
    
    
    3,208Expected return on negative plan assets
    
    
    732
    
    
    
    365
    
    
    
    248Recognition of 
Actuarial (gain) loss
    
    
    (3,727
    )
    
    
    5,473
    
    
    
    (5,555
    )Total periodic pension (credit) cost
    
    
    1,594
    
    
    
    10,333
    
    
    
    (520
    )Curtailment gain
    
    
    (302
    )
    
    
    
    
    
    
    (1,176
    )Net pension (credit) expense
    
    $
    1,292
    
    
    $
    10,333
    
    
    $
    (1,696
    )
     Fiscal Years Ending
    
    (dollars in thousands)Benefit payments2009
    
    $
    3,8722010
    
    
    3,9172011
    
    
    3,9422012
    
    
    3,9932013
    
    
    4,0942014-2018
    
    
    21,459
 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
    
    
    SERPMay 31,
    
    
    June 2,
    
    
    May 31,
    
    
    June 2,
    
    
    May 31,
    
    
    June 2,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(dollars in thousands)Change in Benefit ObligationBenefit obligation at beginning of year
    
    $
    68,924
    
    
    $
    70,490
    
    
    $
    54,241
    
    
    $
    58,345
    
    
    $
    23,063
    
    
    $
    23,822Service cost
    
    
    986
    
    
    
    924
    
    
    
    905
    
    
    
    1,069
    
    
    
    
    
    
    
    Interest cost
    
    
    4,709
    
    
    
    3,968
    
    
    
    2,700
    
    
    
    3,374
    
    
    
    1,614
    
    
    
    1,370Participant contributions
    
    
    69
    
    
    
    55
    
    
    
    1,512
    
    
    
    1,776
    
    
    
    
    
    
    
    Actuarial (gain) loss
    
    
    (3,797
    )
    
    
    (1,723
    )
    
    
    (13,205
    )
    
    
    (3,929
    )
    
    
    (2,554
    )
    
    
    (2,129
    )Benefits paid and expenses
    
    
    (5,625
    )
    
    
    (4,790
    )
    
    
    (4,816
    )
    
    
    (6,394
    )
    
    
    
    
    
    
    Plan amendment
    
    
    446
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefit obligation at end of year
    
    $
    65,712
    
    
    $
    68,924
    
    
    $
    41,337
    
    
    $
    54,241
    
    
    $
    22,123
    
    
    $
    23,063Change in Fair Value of Plan AssetsFair value of plan assets at beginning
of year
    
    $
    68,260
    
    
    $
    65,971
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    1,651
    
    
    
    7,024
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Participant contributions
    
    
    69
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid and expenses
    
    
    (5,625
    )
    
    
    (4,790
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value of plan assets at end of year
    
    $
    64,355
    
    
    $
    68,260
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reconciliation of Funded StatusFunded Status
    
    $
    (1,357
    )
    
    $
    (664
    )
    
    $
    (41,337
    )
    
    $
    (54,241
    )
    
    $
    (22,123
    )
    
    $
    (23,063
    )Unrecognized net actuarial (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrecognized prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net pension liability
    
    $
    (1,357
    )
    
    $
    (664
    )
    
    $
    (41,337
    )
    
    $
    (54,241
    )
    
    $
    (22,123
    )
    
    $
    (23,063
    )Amounts Recognized in the Balance SheetAccrued liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (3,909
    )
    
    $
    (4,698
    )
    
    $
    
    
    
    $
    Other liabilities
    
    
    (1,357
    )
    
    
    (664
    )
    
    
    (37,428
    )
    
    
    (49,543
    )
    
    
    (10,050
    )
    
    
    (11,974
    )Liabilities subject to compromise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,073
    )
    
    
    (11,089
    )Net amount recognized
    
    $
    (1,357
    )
    
    $
    (664
    )
    
    $
    (41,337
    )
    
    $
    (54,241
    )
    
    $
    (22,123
    )
    
    $
    (23,063
    )Amounts Recognized in Accumulated 
Other Comprehensive Income (Loss)Net actuarial gain (loss)
    
    $
    (5,033
    )
    
    $
    (3,958
    )
    
    $
    (2,205
    )
    
    $
    (15,598
    )
    
    $
    5,266
    
    
    $
    2,795Prior service credit (cost)
    
    
    (1,843
    )
    
    
    (1,714
    )
    
    
    41,089
    
    
    
    48,480
    
    
    
    
    
    
    
    Total
    
    $
    (6,876
    )
    
    $
    (5,672
    )
    
    $
    38,884
    
    
    $
    32,882
    
    
    $
    5,266
    
    
    $
    2,795
 78




---



##### 



Pension
    
    Postretirement
    
    SERPFifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-
    
    Fifty-Two
    
    Two
    
    Three
    
    Two
    
    Two
    
    Three
    
    Two
    
    Two
    
    ThreeWeeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    Weeks
    
    WeeksEnded
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    EndedMay 31,
    
    June 2,
    
    June 3,
    
    May 31,
    
    June 2,
    
    June 3,
    
    May 31,
    
    June 2,
    
    June 3,2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006(dollars in thousands)Weighted-average
actuarial assumptionsLiability discount rate
    
    
    6.7
    %
    
    
    6.0
    %
    
    
    5.8
    %
    
    
    6.5
    %
    
    
    6.1
    %
    
    
    6.3
    %
    
    
    6.7
    %
    
    
    6.0
    %
    
    
    5.8
    %Expense discount rate
    
    
    6.0
    %
    
    
    5.8
    %
    
    
    6.0
    %
    
    
    6.1
    %
    
    
    6.3
    %
    
    
    5.5
    %
    
    
    6.0
    %
    
    
    5.8
    %
    
    
    6.0
    %Expected return on
plan assets
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  Pension
    
    
    Postretirement
    
    
    SERPFifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-
    
    
    Fifty-Two
    
    
    Two
    
    
    Three
    
    
    Two
    
    
    Two
    
    
    Three
    
    
    Two
    
    
    Two
    
    
    ThreeWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedMay 31,
    
    
    June 2,
    
    
    June 3,
    
    
    May 31,
    
    
    June 2,
    
    
    June 3,
    
    
    May 31,
    
    
    June 2,
    
    
    June 3,2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006(dollars in thousands)Service cost
    
    $
    845
    
    
    $
    924
    
    
    $
    904
    
    
    $
    905
    
    
    $
    1,069
    
    
    $
    1,444
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    4,037
    
    
    
    3,968
    
    
    
    4,038
    
    
    
    2,700
    
    
    
    3,374
    
    
    
    3,391
    
    
    
    1,384
    
    
    
    1,370
    
    
    
    1,354Expected return on plan assets
    
    
    (5,591
    )
    
    
    (5,402
    )
    
    
    (4,885
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service
cost (credit)
    
    
    272
    
    
    
    275
    
    
    
    285
    
    
    
    (7,392
    )
    
    
    (7,392
    )
    
    
    (7,392
    )
    
    
    
    
    
    
    
    
    
    
    Recognized net actuarial loss
    
    
    
    
    
    
    32
    
    
    
    542
    
    
    
    187
    
    
    
    990
    
    
    
    1,308
    
    
    
    (72
    )
    
    
    
    
    
    
    Net periodic benefit cost (credit)
    
    $
    (437
    )
    
    $
    (203
    )
    
    $
    884
    
    
    $
    (3,600
    )
    
    $
    (1,959
    )
    
    $
    (1,249
    )
    
    $
    1,312
    
    
    $
    1,370
    
    
    $
    1,354
  Pension
    
    
    Postretirement
    
    
    SERP(dollars in thousands)Net actuarial (gain) loss
    
    $
    
    
    
    $
    
    
    
    $
    (501
    )Prior service cost (credit)
    
    
    330
    
    
    
    (6,928
    )
    
    
    Total estimated 2008 amortization
    
    $
    330
    
    
    $
    (6,928
    )
    
    $
    (501
    )
 79




---



##### 



Future Funding and Benefit Payments
  Fiscal Years Ending
    
    Pension
    
    Postretirement
    
    SERP(dollars in thousands)Employer contributions
(reduced by expected participant contributions)2009
    
    $
    
    
    
    $
    3,909
    
    
    
    (A
    )Benefit payments2009
    
    $
    4,783
    
    
    $
    5,211
    
    
    
    (A
    )2010
    
    
    4,799
    
    
    
    4,827
    
    
    
    (A
    )2011
    
    
    4,850
    
    
    
    4,739
    
    
    
    (A
    )2012
    
    
    4,915
    
    
    
    4,562
    
    
    
    (A
    )2013
    
    
    4,990
    
    
    
    4,395
    
    
    
    (A
    )2014-2018
    
    
    25,722
    
    
    
    21,170
    
    
    
    (A
    )
 
  Defined Benefit Pension Plan Assets
  Percentage of Plan Assetsat the Measurement DateTarget
    
    May 31,
    
    June 2,Allocation
    
    2008
    
    2007Equity securities
    
    
    78.0
    %
    
    
    77.0
    %
    
    
    77.6
    %Debt securities
    
    
    22.0
    
    
    
    21.0
    
    
    
    21.2Cash and cash equivalents
    
    
    
    
    
    
    2.0
    
    
    
    1.2Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Postretirement Health Care Cost Trend Rates
  May 31,
    
    June 2,2008
    
    2007Health care cost trend rate for next year
    
    
    10.0
    %
    
    
    10.0
    %Rate to which the cost trend rate is assumed to decline (ultimate trend rate)
    
    
    6.0
    %
    
    
    6.0
    %Year the rates reach the ultimate trend rate
    
    
    2016
    
    
    
    2015
 80




---



##### 



1%
    
    1%Increase
    
    Decrease(dollars in thousands)Effect on total of service and interest cost
    
    $
    393
    
    
    $
    (347
    )Effect on postretirement benefit obligation
    
    
    3,689
    
    
    
    (3,310
    )
 Employee Stock Purchase Plan
  Defined Contribution Retirement Plans
  Negotiated Multi-Employer Pension Plans
   Multi-Employer Postretirement Health Care Benefit Plans
  81




---



##### 



12. Key Employee Retention Plan
   
 13. Stock-Based Compensation
 Share-Based Payment Accounting for
Stock Issued to Employees
  1996 Stock Incentive Plan
  82




---



##### 



WeightedWeighted
    
    AverageAverage
    
    RemainingExercise Price
    
    ContractualShares
    
    Per Share
    
    Term(in 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
    
    
    
    4.2Granted
    
    
    
    
    
    
    Surrendered
    
    
    (704
    )
    
    
    19.64Exercised
    
    
    
    
    
    
    Outstanding, as of May 31, 2008
    
    
    2,560
    
    
    
    14.61
    
    
    
    3.4Exercisable at May 31, 2008
    
    
    2,560
    
    
    
    14.61
    
    
    
    3.4
    WeightedAverageFair Value atShares
    
    Grant Date(in thousands)Nonvested, as of June 2, 2007
    
    
    73
    
    
    $
    14.46Granted
    
    
    
    
    
    
    Vested
    
    
    (27
    )
    
    
    14.80Surrendered
    
    
    (46
    )
    
    
    14.26Nonvested, as of May 31, 2008
    
    
    
    
    
    
    
  83




---



##### 



Pro Forma Employee Stock-Based Compensation Expense
 Accounting for Stock-Based Compensation  Transition and Disclosure, an
amendment of FASB Statement No. 123
 Fifty-ThreeWeeksEndedJune 3,2006(dollars in thousands,except per share data)Net loss, as reported
    
    $
    (128,317
    )Add: Stock-based employee
compensation expense included
in reported net income, net of
related tax effects
    
    
    944Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects
    
    
    (1,375
    )Pro forma net loss
    
    $
    (128,748
    )Basic and diluted loss per shareAs reported
    
    $
    (2.84
    )Pro forma
    
    
    (2.85
    )
 
 14. Restructuring Charges (Credits)
  Fifty-Two
    
    
    Fifty-Two
    
    
    Fifty-ThreeWeeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    EndedMay 31,
    
    
    June 2,
    
    
    June 3,2008
    
    
    2007
    
    
    2006(dollars in thousands)Severance costs
    
    $
    7,181
    
    
    $
    (414
    )
    
    $
    6,101Long-lived asset (credits) charges
    
    
    (3,512
    )
    
    
    (5,511
    )
    
    
    (38,570
    )Curtailment gain on a benefit plan
    
    
    
    
    
    
    
    
    
    
    (706
    )Other exit costs
    
    
    2,005
    
    
    
    1,852
    
    
    
    5,988Total
    
    $
    5,674
    
    
    $
    (4,073
    )
    
    $
    (27,187
    )
 Fiscal 2008 Restructuring Plans
   84




---



##### 



Fiscal 2006 Restructuring Plans
    Fiscal 2005 Restructuring Plans
    85




---



##### 



Fiscal 2004 Restructuring Plan
  Fiscal 2003 Restructuring Plan
    Severance
    
    Long-Livedand Related
    
    AssetBenefits
    
    Charges (Credits)
    
    Other
    
    Total(dollars in thousands)Fiscal 2003 PlanBalance 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Paid in Fiscal 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance June 2, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Paid in Fiscal 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2004 PlanBalance 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
    
    
    
    
    
    
    
    10,636
 86




---



##### 



Severance
    
    Long-Livedand Related
    
    AssetBenefits
    
    Charges (Credits)
    
    Other
    
    Total(dollars in thousands)Balance 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Paid in Fiscal 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2005 Consolidation
& RIF PlanBalance 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
    
    
    
    
    
    
    
    
    
    
    
    10Expensed in Fiscal 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Paid in Fiscal 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in 2008
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Balance May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2005 PC Review PlanBalance 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
    
    
    
    
    
    
    
    
    
    
    
    4Expensed in Fiscal 2008
    
    
    
    
    
    
    (493
    )
    
    
    156
    
    
    
    (337
    )Cash Paid in Fiscal 2008
    
    
    
    
    
    
    
    
    
    
    (156
    )
    
    
    (156
    )Noncash Utilization in 2008
    
    
    (4
    )
    
    
    493
    
    
    
    
    
    
    
    489Balance May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    60Expensed in Fiscal 2008
    
    
    761
    
    
    
    
    
    
    
    3
    
    
    
    764Cash Paid in Fiscal 2008
    
    
    (10
    )
    
    
    
    
    
    
    (3
    )
    
    
    (13
    )Noncash Utilization in 2008
    
    
    (811
    )
    
    
    
    
    
    
    
    
    
    
    (811
    )Balance May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal 2006 Accounting
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
    
    
    
    214
 87




---



##### 



Severance
    
    Long-Livedand Related
    
    AssetBenefits
    
    Charges (Credits)
    
    Other
    
    Total(dollars in thousands)Cash Paid in Fiscal 2007
    
    
    (461
    )
    
    
    
    
    
    
    (46
    )
    
    
    (507
    )Noncash Utilization in 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance June 2, 2007
    
    
    43
    
    
    
    
    
    
    
    9
    
    
    
    52Expensed in Fiscal 2008
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    (25
    )Cash Paid in Fiscal 2008
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    (23
    )Noncash Utilization in 2008
    
    
    5
    
    
    
    
    
    
    
    (9
    )
    
    
    (4
    )Balance May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FY 2008 Southern CaliforniaBalance June 2, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2008
    
    
    5,347
    
    
    
    (3,019
    )
    
    
    1,494
    
    
    
    3,822Cash Paid in Fiscal 2008
    
    
    (5,048
    )
    
    
    
    
    
    
    (1,494
    )
    
    
    (6,542
    )Noncash Utilization in 2008
    
    
    
    
    
    
    3,019
    
    
    
    
    
    
    
    3,019Balance May 31, 2008
    
    
    299
    
    
    
    
    
    
    
    
    
    
    
    299FY 2008 Sales
ReorganizationBalance June 2, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expensed in Fiscal 2008
    
    
    1,098
    
    
    
    
    
    
    
    352
    
    
    
    1,450Cash Paid in Fiscal 2008
    
    
    (1,058
    )
    
    
    
    
    
    
    (232
    )
    
    
    (1,290
    )Noncash Utilization in 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance May 31, 2008
    
    
    40
    
    
    
    
    
    
    
    120
    
    
    
    160ConsolidatedBalance 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
    
    
    
    126Expensed in Fiscal 2008
    
    
    7,181
    
    
    
    (3,512
    )
    
    
    2,005
    
    
    
    5,674Cash Paid in Fiscal 2008
    
    
    (6,139
    )
    
    
    
    
    
    
    (1,885
    )
    
    
    (8,024
    )Noncash Utilization in 2008
    
    
    (820
    )
    
    
    3,512
    
    
    
    (9
    )
    
    
    2,683Balance May 31, 2008
    
    $
    339
    
    
    $
    
    
    
    $
    120
    
    
    $
    459
   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
    
    
    
    18,796
    
    
    
    (3,928
    )
    
    
    21,733Fiscal 2006 PC Review Plan
    
    
    6,684
    
    
    
    (20,620
    )
    
    
    3,648
    
    
    
    (10,288
    )Fiscal 2006 Accounting Office Closings
    
    
    479
    
    
    
    
    
    
    
    55
    
    
    
    534Fiscal 2008 Southern California
    
    
    5,347
    
    
    
    (3,019
    )
    
    
    1,494
    
    
    
    3,822Fiscal 2008 Sales Reorganization
    
    
    1,098
    
    
    
    
    
    
    
    352
    
    
    
    1,450
 88




---



##### 



15. Reorganization Charges
  Fifty-Two Weeks Ended
    
    
    Fifty-Two Weeks Ended
    
    
    Fifty-Three Weeks EndedMay 31, 2008
    
    
    June 2, 2007
    
    
    June 3, 2006Reorganization
    
    
    Cash
    
    
    Reorganization
    
    
    Cash
    
    
    Reorganization
    
    
    CashCharges
    
    
    Payments
    
    
    Charges
    
    
    Payments
    
    
    Charges
    
    
    Payments(dollars in thousands)Professional fees
    
    $
    39,881
    
    
    $
    38,853
    
    
    $
    35,352
    
    
    $
    37,374
    
    
    $
    35,089
    
    
    $
    35,211Employee retention
expenses 
(See Note 12)
    
    
    72
    
    
    
    366
    
    
    
    963
    
    
    
    3,317
    
    
    
    6,047
    
    
    
    4,332Lease rejections
    
    
    560
    
    
    
    33
    
    
    
    210
    
    
    
    20
    
    
    
    937
    
    
    
    Interest income
    
    
    (1,500
    )
    
    
    (1,083
    )
    
    
    (3,075
    )
    
    
    (3,794
    )
    
    
    (4,461
    )
    
    
    (3,562
    )Gain on sale of assets
    
    
    (1,620
    )
    
    
    (1,620
    )
    
    
    (825
    )
    
    
    (825
    )
    
    
    (597
    )
    
    
    (597
    )Write-off of debt fees
    
    
    5,326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reorganization charges, net
    
    $
    42,719
    
    
    $
    36,549
    
    
    $
    32,625
    
    
    $
    36,092
    
    
    $
    37,015
    
    
    $
    35,384
 
 16. Income Taxes
  Fifty-Two
    
    Fifty-Two
    
    Fifty-ThreeWeeks Ended
    
    Weeks Ended
    
    Weeks EndedMay 31,
    
    June 2,
    
    June 3,2008
    
    2007
    
    2006Statutory federal tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income tax, net
    
    
    2.6
    
    
    
    2.6
    
    
    
    1.1Permanent differences
    
    
    (4.7
    )
    
    
    (1.7
    )
    
    
    (0.8
    )Valuation allowance increase
    
    
    (27.5
    )
    
    
    (30.0
    )
    
    
    (25.9
    )Adjustments to prior year tax reserve and refundable credits
    
    
    1.0
    
    
    
    0.8
    
    
    
    1.8Other
    
    
    0.1
    
    
    
    (0.2
    )
    
    
    (0.3
    )6.5
    %
    
    
    6.5
    %
    
    
    10.9
    %
   89




---



##### 



Fifty-Two
    
    
    Fifty-Two
    
    
    Fifty-ThreeWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedMay 31,
    
    
    June 2,
    
    
    June 3,2008
    
    
    2007
    
    
    2006(dollars in thousands)CurrentFederal
    
    $
    (7,077
    )
    
    $
    (5,785
    )
    
    $
    (9,759
    )State
    
    
    144
    
    
    
    (1,251
    )
    
    
    (4,153
    )(6,933
    )
    
    
    (7,036
    )
    
    
    (13,912
    )DeferredFederal
    
    
    (2,964
    )
    
    
    (755
    )
    
    
    (1,508
    )State
    
    
    (67
    )
    
    
    (86
    )
    
    
    (173
    )(3,031
    )
    
    
    (841
    )
    
    
    (1,681
    )$
    (9,964
    )
    
    $
    (7,877
    )
    
    $
    (15,593
    )
  May 31,
    
    
    June 2,2008
    
    
    2007(dollars in thousands)Deferred tax liabilities:Property and equipment
    
    $
    (102,020
    )
    
    $
    (116,988
    )Intangibles
    
    
    (48,977
    )
    
    
    (46,257
    )Other
    
    
    (7,931
    )
    
    
    (10,735
    )Gross deferred tax liabilities
    
    
    (158,928
    )
    
    
    (173,980
    )Deferred tax asset:Payroll and benefits accruals
    
    
    68,168
    
    
    
    77,362Self-insurance reserves
    
    
    82,143
    
    
    
    81,288Net operating loss carryforwards
    
    
    106,801
    
    
    
    71,023Other
    
    
    11,009
    
    
    
    10,850Gross deferred tax assets
    
    
    268,121
    
    
    
    240,523Less: Valuation allowance
    
    
    (165,627
    )
    
    
    (123,281
    )Net deferred tax asset
    
    
    102,494
    
    
    
    117,242Net deferred tax liability
    
    $
    (56,434
    )
    
    $
    (56,738
    )
  May 31,
    
    
    June 2,2008
    
    
    2007(dollars in thousands)Other current assets
    
    $
    13,041
    
    
    $
    18,051Deferred income taxes (non-current)
    
    
    (69,475
    )
    
    
    (74,789
    )Net deferred tax liability
    
    $
    (56,434
    )
    
    $
    (56,738
    )
  90




---



##### 



Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109
  Gross unrecognized tax benefits at June 3, 2007
    
    $
    10,564Decreases in tax positions for prior years
    
    
    (3,738
    )Increases in tax positions for current year
    
    
    2,027Gross unrecognized tax benefits at May 31, 2008
    
    $
    8,853
    
 17. Commitments and Contingencies
  91




---



##### 



92




---



##### 



93




---



##### 



94




---



##### 



18. Stock Repurchases
  
 19. Stockholder Rights Plan
    
 20. Earnings (Loss) Per Share
  95




---



##### 



Fifty-Two
    
    Fifty-Two
    
    Fifty-ThreeWeeks Ended
    
    Weeks Ended
    
    Weeks EndedMay 31,
    
    June 2,
    
    June 3,2008
    
    2007
    
    2006(in thousands)Weighted average common shares outstanding:Basic and diluted
    
    
    45,195
    
    
    
    45,171
    
    
    
    45,124
   
 21. Comprehensive Loss
  Fifty-Two
    
    
    Fifty-Two
    
    
    Fifty-ThreeWeeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    EndedMay 31,
    
    
    June 2,
    
    
    June 3,2008
    
    
    2007
    
    
    2006(dollars in thousands)Net loss
    
    $
    (143,684
    )
    
    $
    (112,848
    )
    
    $
    (128,317
    )Other comprehensive income (loss):Commodity derivative (gains) losses reclassified to cost of products sold, net of
income taxes of $0
    
    
    
    
    
    
    
    
    
    
    (671
    )Minimum pension liability adjustment, net of income taxes of $2,726, $2,585 and $0
    
    
    4,510
    
    
    
    650
    
    
    
    4,3284,510
    
    
    
    650
    
    
    
    3,657Comprehensive loss
    
    $
    (139,174
    )
    
    $
    (112,198
    )
    
    $
    (124,660
    )
  May 31,
    
    June 2,2008
    
    2007(dollars in thousands)Unamortized pension and other postretirement net credits (See Note 11. Employee Benefit Plans)
    
    $
    34,763
    
    
    $
    30,220
 96




---



##### 



22. Segment Information
 Disclosures about Segments of an Enterprise and Related Information
  Route sales
 Outlet sales
 Direct sales
      97




---



##### 



Fifty-Two
    
    
    Fifty-Two
    
    
    Fifty-ThreeWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedMay 31, 2008
    
    
    June 2, 2007 (A)
    
    
    June 3, 2006 (A)(dollars in thousands)Net SalesRoute sales
    
    $
    2,425,611
    
    
    $
    2,544,777
    
    
    $
    2,661,465Outlet sales
    
    
    296,659
    
    
    
    322,860
    
    
    
    358,722Direct sales
    
    
    76,067
    
    
    
    49,631
    
    
    
    40,286Total net sales
    
    $
    2,798,337
    
    
    $
    2,917,268
    
    
    $
    3,060,473Segment Income (Loss)Route sales
    
    $
    11,060
    
    
    $
    28,798
    
    
    $
    (11,747
    )Outlet sales
    
    
    21,007
    
    
    
    10,902
    
    
    
    10,682Direct sales
    
    
    6,773
    
    
    
    3,595
    
    
    
    4,394Total segment income (loss)
    
    
    38,840
    
    
    
    43,295
    
    
    
    3,329Corporate (B)
    
    
    (103,412
    )
    
    
    (82,936
    )
    
    
    (59,697
    )Total operating loss
    
    
    (64,572
    )
    
    
    (39,641
    )
    
    
    (56,368
    )Interest expense
    
    
    46,374
    
    
    
    49,591
    
    
    
    52,504Reorganization charges
    
    
    42,719
    
    
    
    32,625
    
    
    
    37,015Other income
    
    
    (17
    )
    
    
    (1,132
    )
    
    
    (2,994
    )89,076
    
    
    
    81,084
    
    
    
    86,525Loss before income taxes and cumulative effect of
accounting change
    
    
    (153,648
    )
    
    
    (120,725
    )
    
    
    (142,893
    )Provision (benefit) for income taxes
    
    
    (9,964
    )
    
    
    (7,877
    )
    
    
    (15,593
    )Loss before cumulative effect of accounting change
    
    
    (143,684
    )
    
    
    (112,848
    )
    
    
    (127,300
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    (1,017
    )Net loss
    
    $
    (143,684
    )
    
    $
    (112,848
    )
    
    $
    (128,317
    )
 
 (A)
    
    Prior years amounts have been revised to reflect the current fiscal years segment
reporting presentation.(B)
    
    The corporate operating loss for the fiscal years 2008 and 2007 includes net charges of
approximately $20.6 million and $4.6 million, respectively, for restructuring activities,
loss on sale or abandonment of assets, and property and equipment impairment. For fiscal
year 2006 we had a net credit of approximately $17.7 million related to restructuring
credits, loss on sale or abandonment of assets, and property and equipment impairment. 
 23. Subsequent Event
   98




---



##### 



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.
    99




---



##### 



Insufficient Resources
 Use of Third Party Specialists
   Changes in Internal Control over Financial Reporting
   
    
    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.
  
 ITEM 9B. OTHER INFORMATION
  100




---



##### 



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Board of Directors
  DirectorName
    
    Age
    
    Since
    
    Principal Occupations and Employment During the Past Five Years and DirectorshipsMichael J. Anderson 1
    
    
    57
    
    
    
    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
    
    
    65
    
    
    
    1991
    
    
    Managing Director
of Monitor Clipper
Partners, a private
equity investment
firm, for more than
five years. Mr.
Calhoun is a
director of The
Lord Abbett Family
of Funds.Craig D. Jung
    
    
    55
    
    
    
    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 Master
in Public
Administration
degree.William P. Mistretta1
    
    
    52
    
    
    
    2006
    
    
    President and Chief
Executive Officer
of American Baked
Ingredients, a
company that
supplies baked
ingredients to the
ice cream
manufacturing
industry, January
2008 to present;
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, March
2006 to January
2008; 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.David I. Pauker2,3
    
    
    49
    
    
    
    2007
    
    
    Managing 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
    
    
    63
    
    
    
    2007
    
    
    Director of the
following public
company: Winn-Dixie
Stores, Inc.,and
the following
non-public
companies: World
Kitchens, Inc.,
City of Hope
National Cancer
Center and the
Beckman Research
Institute, Ruiz
Foods Corp., Inmar,
Inc. and
Andronicos
Markets, Inc.Philip A. Vachon3
    
    
    51
    
    
    
    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.
 
 1
    
    Member of the Audit Committee2
    
    Member of the Compensation Committee3
    
    Member of the Nominating/Corporate Governance Committee 101




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##### 



Executive Officers
  Name
    
    Age
    
    Principal Occupations and Employment During the Past Five YearsCraig D. Jung
    
    
    55
    
    
    Chief Executive Officer of IBC since February 2007; Retired,
June 2004 to February 2007; Attended Harvard University from
August 2003 to June 2004, where he received a Master in Public
Administration degree.Michael D. Kafoure
    
    
    59
    
    
    President Route Sales of IBC since September 2007; President
and Chief Operating Officer of IBC for more than four years
prior thereto.David A. Loeser
    
    
    54
    
    
    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 of Celanese
Corporation, a company engaged in the manufacture of building
block chemicals, from April 2005 to May 2006; Senior Vice
President Human Resources of CompuCom Systems, Inc., a company
offering business software applications and software
management services, for more than two years prior thereto.Kent B. Magill
    
    
    55
    
    
    Executive Vice President, General Counsel and Corporate
Secretary of IBC since August 2005; Vice President, General
Counsel and Corporate Secretary of IBC for more than two years
prior thereto.Suresh Mathews
    
    
    54
    
    
    Consultant, Acting Executive Vice President  Information
Technology and Chief Information Officer of IBC since February
2008; President of Digital Standard Inc., a unified digital
social networking company, from August 2004 to February 2008;
Senior Vice President and Chief Information Officer of
CompuCom Systems, Inc., a company offering business software
applications and software management services, for more than
one year prior thereto.Jane S. Miller
    
    
    49
    
    
    Consultant, Acting Executive Vice President and Chief Customer
Officer of IBC since July 2007; Consultant of IBC from March
2007 to July 2007; President of 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 H.J. Heinz Company from
September 2004 to May 2005; Attended Regis University for more
than one year prior thereto.Richard C. Seban
    
    
    56
    
    
    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
two years prior thereto.Gary K. Wandschneider
    
    
    56
    
    
    Consultant, Acting Executive Vice President  Operations of
IBC since July 2007; Executive Vice President of Pepsi
Bottling Group, Inc., the largest manufacturer and
distribution of Pepsi-Cola beverages, for more than three
years prior to November 2006.J. Randall Vance
    
    
    48
    
    
    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, for more than one year
prior thereto.Jimmy D. Williams
    
    
    68
    
    
    Senior Vice President-Direct Sales of IBC since May 2007;
Senior Vice President-Sales and Trade Marketing of IBC from
March 2006 to May 2007; Vice President-Special Initiatives and
Merchandising of IBC from April 2005 to March 2006; Senior
Vice President-Central Division South of IBC for more than 2
years prior thereto.Melvin H. Ghearing
    
    
    59
    
    
    Vice President  Bakery Outlet Business Unit of IBC since
June 2004; Vice President  Retail Operations of IBC for more
than one year prior thereto.Laura D. Robb
    
    
    50
    
    
    Vice President and Corporate Controller of IBC for more than
the past 5 years.
 102




---



##### 



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
 103




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##### 



ITEM 11. EXECUTIVE COMPENSATION
 Summary Compensation Table
  Salary
    
    Bonus
    
    All other
    
    TotalName and principal position
    
    Year
    
    ($)
    
    ($)
    
    Compensation ($)
    
    ($)Craig D. Jung1
    
    
    2008
    
    
    
    900,000
    
    
    
    
    
    
    
    29,544
    2
    
    
    929,544CEO
    
    
    2007
    
    
    
    263,080
    
    
    
    1,200,000
    
    
    
    158,590
    
    
    
    1,621,670David A. Loeser3
    
    
    2008
    
    
    
    1,389,800
    
    
    
    75,000
    
    
    
    
    
    
    
    1,464,800Acting EVP, HR
    
    
    2007
    
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    30,000Gary K. Wandschneider4
    
    
    2008
    
    
    
    1,428,500
    
    
    
    100,000
    
    
    
    
    
    
    
    1,528,500Acting EVP, Operations
    
    
    2007
    
    
    
    112,000
    
    
    
    
    
    
    
    
    
    
    
    112,000
 
 1
    
    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. In addition, in fiscal 2007 Mr. Jung received a signing
bonus of $1,200,000 pursuant to the terms of his employment agreement.
See the discussion of his employment agreement under Agreements with
Named Executive Officers.2
    
    All other compensation for Mr. Jung for the fiscal year ended May 31,
2008 includes: (i) taxable income for a car allowance in the amount
of $14,215; (ii) taxable income for financial advisory services in the
amount of $1,538; (iii) imputed income for term life insurance
provided by the Company in the amount of $1,247; and (iii) $12,544
related to moving expenses (including the applicable tax gross-up).3
    
    Mr. Loeser is a consultant serving as Acting Executive Vice President
 Human Resources pursuant to a Consulting Agreement between the
Company and Interim LLC. Pursuant to the terms of the initial
consulting agreement, he received a $75,000 discretionary performance
bonus.4
    
    Mr. Wandschneider is a consultant serving as Acting Executive Vice
President  Operations pursuant to a Consulting Agreement between the
Company and Timpanogos Consulting LLC. Pursuant to the terms of the
initial consulting agreement, he received a $100,000 discretionary
performance bonus. Agreements with Named Executive Officers
  Craig D. Jung
  104




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##### 



(1)
    
    0.25% of Total Enterprise Value (as defined in the employment
agreement) in excess of $500 million but less than $600 million, plus:
(i) an additional 0.50% of Total Enterprise Value in excess of $600
million but less than $700 million, plus: (ii) an additional 0.75% of
Total Enterprise Value in excess of $700 million but less than $800
million, plus: (iii) 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 .
 David A. Loeser
  Gary K. Wandschneider
  Outstanding Equity Awards at Fiscal Year-End
  105




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##### 



Employment Agreements with Named Executive Officers.
 Potential Payments upon Termination or Change in Control
 Mr. Jungs Employment Agreement
     106




---



##### 



Compensation of Directors
  Fees Earned or Paid in Cash1Name
    
    ($)Michael J. Anderson
    
    $
    193,500Robert B. Calhoun
    
    
    130,000William P. Mistretta
    
    
    120,500David I. Pauker
    
    
    119,250Terry R. Peets
    
    
    122,250Philip A. Vachon
    
    
    111,750
 
 1
    
    The fees include Board and Committee retainers and attendance fees
(see below) earned during fiscal 2008. 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 2008, the
Board met 31 times (23 of which were telephonic), the Audit Committee
met 8 times (6 of which were telephonic), the Compensation Committee
met 2 times (both of which were telephonic), and the
Nominating/Corporate Governance Committee met 1 time (which was in
person). FORM
OF COMPENSATION
    
    AMOUNT OF COMPENSATIONChairman of the Board Retainer
    
    $
    150,000Annual Retainer
    
    
    75,000Annual Retainer for Audit Committee Chairman
    
    
    15,000Annual Retainer for Other Committee Chairmen
    
    
    7,500Board Attendance Fee (each meeting)In Person
    
    
    2,000Telephonic
    
    
    1,000Committee Attendance Fee (each meeting)In Person (same day as Board Meeting)
    
    
    750In Person (not same day as Board Meeting)
    
    
    1,000Telephonic
    
    
    500
  Name
    
    Options OutstandingMichael J. Anderson
    
    
    58,000Robert B. Calhoun
    
    
    60,000
 107




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##### 



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
    
    
    2,560,000
    
    
    $
    14.61
    
    
    
    9,957,000Equity compensation plans not approved by security
holders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    2,560,000
    
    
    $
    14.61
    
    
    
    9,957,000
 Holdings of Principal Stockholders
  (3)Amount andnature of(1)
    
    (2)
    
    beneficial
    
    (4)Title of Class
    
    Name and address of beneficial owner
    
    ownership
    
    Percent of ClassCommon
    
    QVT Financial LP 1527 Madison Avenue, 8th FloorNew York, NY 10022
    
    
    3,322,495
    
    
    7.320 %
 
 1
    
    The information concerning beneficial ownership was obtained from a
Schedule 13G report of QVT Financial LP filed with the SEC on February
14, 2005. 108




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##### 



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
    
    
    54,095
    1,2
    
    
    *Common
    
    Robert B. Calhoun
    
    
    57,257
    1,2
    
    
    *Common
    
    Craig D. Jung
    
    
    0Common
    
    David A. Loeser
    
    
    0Common
    
    William P. Mistretta
    
    
    0Common
    
    David I. Pauker
    
    
    0Common
    
    Terry R. Peets
    
    
    0Common
    
    Philip A. Vachon
    
    
    0Common
    
    Gary K. Wandschneider
    
    
    0Common
    
    All Named Executive Officers, directors and 
     executive officers as a group (18 persons)
    
    
    462,456
    ,2
    
    
    1.01
    %
 
 *
    
    Less than 1%1
    
    Of the shares indicated, 48,000 (Mr. Anderson), 50,000 (Mr. Calhoun)
and 434,333 (all directors, Named Executive Officers and executive
officers as a group) are attributable to currently exercisable stock
options.2
    
    Of the shares indicated, 9,050 (4,525 for each of Messrs. Anderson and
Calhoun) and 9,050 (all directors, Named Executive Officers and
executive officers as a group) are attributable to phantom stock
units. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Transactions with Related Persons
  109




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##### 



Director Independence
     110




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##### 



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
  111




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##### 



112




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##### 



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
    
 
      113




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##### 



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 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).10.4
    
    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).10.5
    
    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).10.5.1
    
    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).
 114




---



##### 



Exhibit No.
    
    Exhibit10.5.2
    
    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).10.5.3
    
    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).10.5.4
    
    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).10.5.5
    
    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).10.5.6
    
    Sixth Amendment, dated as of September 7, 2004, to the Amended and Restated Credit Agreement,
dated April 25, 2002, among Interstate Bakeries Corporation, as a Guarantor, Interstate Brands
Corporation and Interstate Brands West Corporation, each as a Borrower, the several Lenders
from time to time parties thereto, The Bank of Nova Scotia, BNP Paribas, Cooperatieve Central
Raiffeisen-Boerenleenbank B.A., Rabobank International, New York Branch, and SunTrust Bank,
each as a co-documentation agent, Bank of America, N.A., as syndication agent and JPMorgan
Chase Bank, as administrative agent (incorporated herein by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Interstate Bakeries Corporation filed on September 13, 2004).10.5.7
    
    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).10.6
    
    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 Interstate Bakeries Corporations Annual Report on Form
10-K for the fiscal year ended June 2, 2001, filed on August 24, 2001).10.7
    
    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).
 115




---



##### 



Exhibit No.
    
    Exhibit10.8
    
    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).10.9
    
    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 fiscal year ended May 29, 2004, filed October 6, 2006).10.10
    
    Interstate Bakeries Corporation Rabbi Trust Agreement (incorporated herein by reference to
Exhibit 10.8 to Interstate Bakeries Corporations Annual Report on Form 10-K for the fiscal
year ended June 1, 2002, filed on August 23, 2002).10.10.1
    
    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
for the fiscal year ended May 31, 2003, filed on August 23, 2003).10.11
    
    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 Interstate Bakeries Corporations Annual Report on Form 10-K for the fiscal year ended
June 1, 2002, filed on August 23, 2002).10.12
    
    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
Interstate Bakeries Corporations Annual Report on Form 10-K for the fiscal year ended June 1,
2002, filed on August 23, 2002).10.13
    
    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).10.14
    
    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).10.15
    
    Form of Registration Rights Agreement for 6.0% Senior Subordinated Convertible Notes Due 2014
(incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of
Interstate Bakeries Corporation filed on August 12, 2004).10.16
    
    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).10.16.1
    
    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 fiscal year ended May 29, 2004, filed October 6, 2006).10.17
    
    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
 116




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##### 



Exhibit No.
    
    ExhibitChapter 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).10.17.1
    
    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).10.17.2
    
    Second Amendment, effective as of January 20, 2005, to the Revolving Credit Agreement, dated as
of September 23, 2004, among Interstate Bakeries Corporation (Parent Borrower), a debtor and
debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, and each of the
direct and indirect subsidiaries of the Parent Borrower party to this Agreement (each
individually a Subsidiary Borrower and collectively the Subsidiary Borrowers; and together
with the Parent Borrower, the Borrowers), each of which is a debtor and debtor-in-possession
in a case pending under Chapter 11 of the Bankruptcy Code (the cases of the Borrowers, each a
Case and collectively, the Cases), JPMorgan Chase Bank (JPMCB), and each of the other
commercial banks, finance companies, insurance companies or other financial institutions or
funds from time to time party hereto (together with JPMCB, the Lenders), J.P. Morgan
Securities Inc., as lead arranger and book runner, JPMorgan Chase Bank, as administrative agent
(in such capacity, the Administrative Agent) for the Lenders, and JPMorgan Chase Bank, as
collateral agent (in such capacity, the Collateral) for the Lenders (incorporated herein by
reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on
February 1, 2005).10.17.3
    
    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
 117




---



##### 



Exhibit No.
    
    ExhibitBank), 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).10.17.4
    
    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).10.17.5
    
    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).10.17.6
    
    Sixth Amendment, dated as of March 29, 2006, to the Revolving Credit Agreement, dated as of
September 23, 2004, as amended, among Interstate Bakeries Corporation (Parent Borrower), a
Delaware corporation, a debtor and debtor-in-possession in a case pending under Chapter 11 of
the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each
of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the
Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as
JPMorgan Chase Bank) (JPMCB), and certain of the other commercial banks, finance companies,
insurance companies or other financial institutions or funds from time to time party to the
Credit Agreement (together with JPMCB, the Lenders), JPMorgan Chase Bank, N.A., a national
banking association (formerly known as JPMorgan Chase Bank), as administrative agent for the
Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as
JPMorgan Chase Bank), as collateral agent for the Lenders (incorporated herein by reference to
the Current Report on Form 8-K of Interstate Bakeries Corporation filed on March 29, 2006).10.17.7
    
    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
 118




---



##### 



Exhibit No.
    
    Exhibitassociation (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).10.17.8
    
    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).10.17.9
    
    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).10.17.10
    
    First Amendment, dated as of October 1, 2007, to the Amended and Restated Revolving Credit
Agreement, dated as of February 16, 2007, 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 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 Amended and Restated Revolving Credit Agreement (together with JPMCB, the
Lenders), and JPMCB as administrative agent and collateral agent for the Lenders
(incorporated by reference to Exhibit 10.1 to Interstate Bakeries Corporations Current Report
on Form 8-K filed on October 2, 2007).10.17.11
    
    Second Amendment, dated as of November 29, 2007, to the Amended and Restated Revolving Credit
Agreement, dated as of February 16, 2007, 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 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 Amended and Restated Revolving Credit Agreement (together with JPMCB, the
Lenders), and JPMCB as administrative agent and collateral agent for the Lenders
(incorporated
 119




---



##### 



Exhibit No.
    
    Exhibitby reference to Exhibit 10.1 to Interstate Bakeries Corporations Current Report
on Form 8-K filed on December 3, 2007).10.17.12
    
    Third Amendment, dated as of December 19, 2007, to the Amended and Restated Revolving Credit
Agreement, dated as of February 16, 2007, 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 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 Amended and Restated Revolving Credit Agreement (together with JPMCB, the
Lenders), and JPMCB as administrative agent and collateral agent for the Lenders
(incorporated by reference to Exhibit 10.1 to Interstate Bakeries Corporations Current Report
on Form 8-K filed on December 19, 2007).10.17.13
    
    Fourth Amendment, dated as of December 19, 2007, to the Amended and Restated Revolving Credit
Agreement, dated as of February 16, 2007, 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 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 Amended and Restated Revolving Credit Agreement (together with JPMCB, the
Lenders), and JPMCB as administrative agent and collateral agent for the (incorporated
herein by reference to Exhibit 10.24.1 to Interstate Bakeries Corporations Quarterly Report on
Form 10-Q for the quarter ended March 8, 2008, filed on April 17, 2008).10.17.14
    
    Second Amended and Restated Revolving Credit Agreement, dated as of May 9, 2008 (the DIP
Agreement), by and 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 wholly-owned direct and indirect subsidiaries of the Parent
Borrower party to the DIP Agreement, 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 (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 DIP
Agreement (together with JPMCB, the Lenders), J.P. Morgan Securities Inc., as lead arranger
and book runner, and JPMCB as administrative agent and collateral agent for the Lenders
(incorporated by reference to Exhibit 10.1 to Interstate Bakeries Corporations Current Report
on Form 8-K filed on May 12, 2008).10.18
    
    Offer of Employment dated July 13, 2005 between Interstate Bakeries Corporation and Mr. Richard
C. Seban (incorporated herein by reference to the Current Report on Form 8-K of Interstate
 120




---



##### 



Exhibit No.
    
    ExhibitBakeries Corporation filed on August 5, 2005).10.19
    
    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 fiscal
year ended May 29, 2004, filed October 6, 2006).10.20
    
    Consulting Agreement dated July 27, 2007 by and among Interstate Brands Corporation and Interim
LLC (incorporated herein by reference to Exhibit 10.22 to Interstate Bakeries Corporations
Quarterly Report on Form 10-Q for the quarter ended August 25, 2007, filed on October 4, 2007).10.20.1
    
    Extension letter dated April 16, 2008 from Interstate Bakeries Corporation to Interim LLC*10.20.2
    
    Extension letter dated May 5, 2008 from Interstate Bakeries Corporation to Interim LLC*10.21
    
    Consulting Agreement dated July 27, 2007 by and among Interstate Brands Corporation and Miller
Management Group, Inc. (incorporated herein by reference to Exhibit 10.23 to Interstate
Bakeries Corporations Quarterly Report on Form 10-Q for the quarter ended August 25, 2007,
filed on October 4, 2007).10.21.1
    
    Extension letter dated April 16, 2008 from Interstate Bakeries Corporation to Miller Management
Group, Inc.*10.21.2
    
    Extension letter dated May 5, 2008 from Interstate Bakeries Corporation to Miller Management
Group, Inc.*10.22
    
    Consulting Agreement dated July 27, 2007 by and among Interstate Brands Corporation and
Timpanogos Consulting LLC (incorporated herein by reference to Exhibit 10.24 to Interstate
Bakeries Corporations Quarterly Report on Form 10-Q for the quarter ended August 25, 2007,
filed on October 4, 2007).10.22.1
    
    Extension letter dated March 25, 2008 from Interstate Bakeries Corporation to Timpanogos
Consulting LLC (incorporated herein by reference to Exhibit 10.24.1 to Interstate Bakeries
Corporations Quarterly Report on Form 10-Q for the quarter ended March 8, 2008, filed on April
17, 2008).10.22.2
    
    Extension letter dated April 16, 2008 from Interstate Bakeries Corporation to Timpanogos
Consulting LLC*10.22.3
    
    Extension letter dated May 5, 2008 from Interstate Bakeries Corporation to Timpanogos
Consulting LLC*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 121




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##### 



SIGNATURES
  INTERSTATE BAKERIES CORPORATIONDated:   September 15, 2008
    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)
    
    September 15, 2008/s/ J. Randall Vance

J. Randall Vance
    
    Chief Financial Officer (Principal Financial and
Accounting Officer)
    
    September 15, 2008/s/ Michael J. Anderson

Michael J. Anderson
    
    Non-Executive Chairman of the Board
    
    September 15, 2008/s/ Robert B. Calhoun

Robert B. Calhoun
    
    Director
    
    September 15, 2008/s/ William P. Mistretta

William P. Mistretta
    
    Director
    
    September 15, 2008/s/ David I. Pauker

David I. Pauker
    
    Director
    
    September 15, 2008/s/ Terry R. Peets

Terry R. Peets
    
    Director
    
    September 15, 2008/s/ Philip A. Vachon

Philip A. Vachon
    
    Director
    
    September 15, 2008
 122




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##### 



INTERSTATE BAKERIES CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FIFTY-TWO WEEKS ENDED
MAY 31, 2008 AND JUNE 2, 2007
AND FIFTY-THREE WEEKS ENDED JUNE 3, 2006  (dollars in thousands)
 Adjustments toBalance at
    
    
    
    
    
    other
    
    Accounts
    
    Balance atbeginning
    
    Adjustments
    
    comprehensive
    
    charged
    
    endDescription
    
    of period
    
    to expense
    
    income
    
    off
    
    of period2008Reserve for discounts and allowances on
accounts receivable
    
    $
    8,699
    
    
    $
    (43
    )
    
    $
    
    
    
    $
    
    
    
    $
    8,656Allowance for doubtful accounts
    
    
    2,315
    
    
    
    (90
    )
    
    
    
    
    
    
    (175
    )
    
    
    2,050Deferred income tax  valuation allowance
    
    
    123,281
    
    
    
    42,346
    
    
    
    
    
    
    
    
    
    
    
    165,6272007Reserve 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
    )
    
    
    
    
    
    
    98,193
 123