##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended November 13, 2004
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission File Number 1-11165
 
 INTERSTATE BAKERIES CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction of incorporation or organization)
    
    43-1470322
(I.R.S. Employer Identification No.)
 12 East Armour Boulevard, Kansas City, Missouri
(Address of principal executive offices)
    
    64111
(Zip Code)
 (816) 502-4000
(Registrants telephone number, including area code)
 o þ
  o þ o
 o þ




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##### Table of Contents



EXPLANATORY NOTE
  2




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##### 



INTERSTATE BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
FORM 10-Q
QUARTER ENDED NOVEMBER 13, 2004
 Description
    
    PagePART I  FINANCIAL INFORMATION (UNAUDITED)
    
    4ITEM 1.
    
    Financial Statements
    
    4Consolidated Balance Sheets
    
    4Consolidated Statements of Operations
    
    5Consolidated Statements of Cash Flows
    
    6Consolidated Statement of Stockholders Equity (Deficit)
    
    7Notes to Consolidated Financial Statements
    
    8ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    36Forward-Looking Statements
    
    39ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    43ITEM 4.
    
    Controls and Procedures
    
    43PART II  OTHER INFORMATION
    
    45ITEM 6.
    
    Exhibits
    
    45Signatures
    
    
    
    46CertificationCertificationSection 1350 CertificationSection 1350 Certification
  3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 INTERSTATE
BAKERIES CORPORATION
(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)  (dollars in thousands, except share data)
 November 13,
    
    
    May 29,2004
    
    
    2004ASSETSCurrent assetsCash
    
    $
    117,864
    
    
    $
    39,728Accounts receivable, less allowance for doubtful accounts of $3,870 and $3,700, respectively
    
    
    182,921
    
    
    
    182,060Inventories
    
    
    72,915
    
    
    
    71,901Assets held for sale
    
    
    
    
    
    
    452Other current assets
    
    
    114,532
    
    
    
    108,577Total current assets
    
    
    488,232
    
    
    
    402,718Property and equipment, net
    
    
    787,129
    
    
    
    812,925Goodwill
    
    
    
    
    
    
    215,346Other intangible assets
    
    
    189,740
    
    
    
    190,416Other assets
    
    
    42,005
    
    
    
    52,392Total assets
    
    $
    1,507,106
    
    
    $
    1,673,797LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Liabilities not subject to compromiseCurrent liabilitiesLong-term debt payable within one year
    
    $
    483,427
    
    
    $
    542,701Accounts payable
    
    
    103,185
    
    
    
    158,754Accrued expenses
    
    
    244,057
    
    
    
    275,354Total current liabilities
    
    
    830,669
    
    
    
    976,809Long-term debt
    
    
    
    
    
    
    10,362Other liabilities
    
    
    292,305
    
    
    
    311,183Deferred income taxes
    
    
    113,536
    
    
    
    113,735Total liabilities not subject to compromise
    
    
    1,236,510
    
    
    
    1,412,089Liabilities subject to compromise
    
    
    283,917
    
    
    
    Stockholders equity (deficit)Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 120,000,000 shares authorized, 81,579,000 shares issued,
45,394,000 and 45,381,000 shares outstanding, respectively
    
    
    816
    
    
    
    816Additional paid-in capital
    
    
    586,472
    
    
    
    586,616Retained earnings
    
    
    87,409
    
    
    
    364,886Treasury stock, 36,185,000 and 36,198,000 shares at cost, respectively
    
    
    (678,736
    )
    
    
    (679,016
    )Unearned restricted stock compensation
    
    
    (5,290
    )
    
    
    (6,982
    )Accumulated other comprehensive loss
    
    
    (3,992
    )
    
    
    (4,612
    )Total stockholders equity (deficit)
    
    
    (13,321
    )
    
    
    261,708Total liabilities and stockholders equity (deficit)
    
    $
    1,507,106
    
    
    $
    1,673,797
  4




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##### Table of Contents



INTERSTATE
BAKERIES CORPORATION(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)  (dollars in thousands, except per share data)
 Twelve Weeks Ended
    
    
    Twenty-Four Weeks Ended(Restated, See
    
    
    
    
    
    
    (Restated, SeeNote 2)
    
    
    
    
    
    
    Note 2)November 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003Net sales
    
    $
    798,711
    
    
    $
    813,798
    
    
    $
    1,610,688
    
    
    $
    1,644,813Cost of products sold (exclusive of items shown below)
    
    
    412,883
    
    
    
    418,045
    
    
    
    825,961
    
    
    
    825,350Selling, delivery and administrative expenses
    
    
    377,030
    
    
    
    402,932
    
    
    
    779,930
    
    
    
    778,811Restructuring charges
    
    
    6,004
    
    
    
    2,060
    
    
    
    13,325
    
    
    
    2,692Depreciation and amortization
    
    
    20,107
    
    
    
    21,257
    
    
    
    41,181
    
    
    
    42,714Loss on sale or abandonment of assets
    
    
    665
    
    
    
    705
    
    
    
    1,331
    
    
    
    773Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    215,346
    
    
    
    816,689
    
    
    
    844,999
    
    
    
    1,877,074
    
    
    
    1,650,340Operating loss
    
    
    (17,978
    )
    
    
    (31,201
    )
    
    
    (266,386
    )
    
    
    (5,527
    )Other (income) expenseInterest expense (excluding unrecorded contractual
interest expense of $850, $0, $850, and $0,
respectively)
    
    
    9,316
    
    
    
    8,641
    
    
    
    18,310
    
    
    
    17,755Reorganization charges, net
    
    
    12,442
    
    
    
    
    
    
    
    12,442
    
    
    
    Other (income) expense
    
    
    (20
    )
    
    
    (8
    )
    
    
    129
    
    
    
    (16
    )21,738
    
    
    
    8,633
    
    
    
    30,881
    
    
    
    17,739Income (loss) before income taxes
    
    
    (39,716
    )
    
    
    (39,834
    )
    
    
    (297,267
    )
    
    
    (23,266
    )Provision (benefit) for income taxes
    
    
    (5,705
    )
    
    
    (15,039
    )
    
    
    (19,790
    )
    
    
    (8,985
    )Net loss
    
    $
    (34,011
    )
    
    $
    (24,795
    )
    
    $
    (277,477
    )
    
    $
    (14,281
    )Loss per shareBasic
    
    $
    (0.76
    )
    
    $
    (0.55
    )
    
    $
    (6.17
    )
    
    $
    (0.32
    )Diluted
    
    $
    (0.76
    )
    
    $
    (0.55
    )
    
    $
    (6.17
    )
    
    $
    (0.32
    )
  5




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##### Table of Contents



INTERSTATE
BAKERIES CORPORATION(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)  (dollars in thousands)
 Twenty-Four Weeks Ended(Restated, SeeNote 2)November 13,
    
    
    November 15,2004
    
    
    2003Operating activitiesNet loss
    
    $
    (277,477
    )
    
    $
    (14,281
    )Depreciation and amortization
    
    
    41,181
    
    
    
    42,714Provision for deferred income taxes
    
    
    20,408
    
    
    
    (19,559
    )Reorganization charges, net
    
    
    12,442
    
    
    
    Cash reorganization items
    
    
    (2,771
    )
    
    
    Non-cash interest expense  deferred debt fees
    
    
    2,065
    
    
    
    1,022Non-cash interest on swap agreements
    
    
    (655
    )
    
    
    (852
    )Non-cash restricted stock and deferred share compensation expense
    
    
    1,055
    
    
    
    Loss on sale, write-down or abandonment of assets
    
    
    5,007
    
    
    
    1,284Write-off of goodwill
    
    
    215,346
    
    
    
    Write-down of software assets
    
    
    4,424
    
    
    
    Write-off prior service cost asset
    
    
    12,384
    
    
    
    Change in operating assets and liabilities:Accounts receivable
    
    
    (861
    )
    
    
    (7,377
    )Inventories
    
    
    (1,014
    )
    
    
    5,772Other current assets
    
    
    (26,562
    )
    
    
    5,797Accounts payable and accrued expenses
    
    
    50,040
    
    
    
    10,411Long-term portion of self insurance reserves
    
    
    12,184
    
    
    
    34,472Other
    
    
    7,306
    
    
    
    8,363Net cash from operating activities
    
    
    74,502
    
    
    
    67,766Investing activitiesPurchases of property and equipment
    
    
    (19,883
    )
    
    
    (24,517
    )Proceeds from sale of assets
    
    
    1,242
    
    
    
    713Acquisition of other intangible assets
    
    
    
    
    
    
    (12
    )Acquisition and development of software assets
    
    
    (5,445
    )
    
    
    (6,027
    )Other
    
    
    50
    
    
    
    (19
    )Net cash used in investing activities
    
    
    (24,036
    )
    
    
    (29,862
    )Financing activitiesReduction of long-term debt
    
    
    (74,686
    )
    
    
    (32,198
    )Increase in revolving credit facility
    
    
    11,400
    
    
    
    Issuance of convertible bonds
    
    
    100,000
    
    
    
    Common stock dividends paid
    
    
    
    
    
    
    (6,329
    )Stock option exercise proceeds
    
    
    
    
    
    
    568Acquisition of treasury stock
    
    
    (44
    )
    
    
    (19
    )Cash reorganization items
    
    
    (63
    )
    
    
    Debt fees
    
    
    (8,937
    )
    
    
    (30
    )Net cash from (used in) financing activities
    
    
    27,670
    
    
    
    (38,008
    )Net increase (decrease) in cash
    
    
    78,136
    
    
    
    (104
    )Cash at the beginning of period
    
    
    39,728
    
    
    
    44,961Cash at the end of period
    
    $
    117,864
    
    
    $
    44,857Cash payments (received)Interest
    
    $
    18,834
    
    
    $
    19,003Income taxes
    
    
    (21,086
    )
    
    
    664Non-cash investing and financing activitiesIssuance of restricted stock
    
    
    221
    
    
    
    Equipment purchases financed with capital lease obligations
    
    
    409
    
    
    
    Long-term debt reduction from lease rejections
    
    
    279
    
    
    
    Asset
disposals from lease rejections
    
    
    215
    
    
    
    
  6




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INTERSTATE
BAKERIES CORPORATION(DEBTOR-IN-POSSESSION)
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
(UNAUDITED)  (dollars in thousands, except per share data)
 Unearned
    
    
    Accumulated
    
    
    TotalAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted
    
    
    Other
    
    
    StockholdersCommon
    
    
    Paid-in
    
    
    Retained
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Comprehensive
    
    
    EquityStock Issued
    
    
    Capital
    
    
    Earnings
    
    
    Treasury Stock
    
    
    Compensation
    
    
    Loss
    
    
    (Deficit)Number
    
    
    Par
    
    
    
    
    
    
    
    
    
    
    Number ofof Shares
    
    
    Value
    
    
    
    
    
    
    
    
    
    
    Shares
    
    
    CostBalance May 29, 2004
    
    
    81,579
    
    
    $
    816
    
    
    $
    586,616
    
    
    $
    364,886
    
    
    
    (36,198
    )
    
    $
    (679,016
    )
    
    $
    (6,982
    )
    
    $
    (4,612
    )
    
    $
    261,708Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (277,477
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    620
    
    
    
    (276,857
    )Restricted share award
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    
    
    
    
    20
    
    
    
    375
    
    
    
    (221
    )
    
    
    
    
    
    
    (1
    )Restricted share
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,881
    
    
    
    
    
    
    
    1,881Restricted share forfeitures
and other
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    (2
    )
    
    
    (51
    )
    
    
    32
    
    
    
    
    
    
    
    (8
    )Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (44
    )
    
    
    
    
    
    
    
    
    
    
    (44
    )Balance November 13, 2004
    
    
    81,579
    
    
    $
    816
    
    
    $
    586,472
    
    
    $
    87,409
    
    
    
    (36,185
    )
    
    $
    (678,736
    )
    
    $
    (5,290
    )
    
    $
    (3,992
    )
    
    $
    (13,321
    )
  7




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##### Table of Contents



INTERSTATE
BAKERIES CORPORATION(DEBTOR-IN-POSSESSION)
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)
 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.
   8




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##### Table of Contents



Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
 9




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##### Table of Contents



2. Restatement
  Workers Compensation Reserve
  ABA Plan
  Leases
  Depreciation
  Supplemental Executive Retirement Plans
  Cash
  Income Taxes
  10




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##### Table of Contents



Twelve Weeks EndedNovember 15, 2003As Previously
    
    
    Effect ofConsolidated Statement of Operations
    
    Reported
    
    
    Restatement
    
    As Restated(dollars in thousands, except per share data)Cost of products sold
    
    $
    397,641
    
    
    $
    20,404
    
    $
    418,045Selling, delivery and administrative expenses
    
    
    372,787
    
    
    
    30,145
    
    
    402,932Depreciation and amortization
    
    
    21,679
    
    
    
    (422
    )
    
    21,257Loss on sale or abandonment of assets
    
    
    
    
    
    
    705
    
    
    705Operating income (loss)
    
    
    19,631
    
    
    
    (50,832
    )
    
    (31,201
    )Interest expense
    
    
    8,398
    
    
    
    243
    
    
    8,641Income (loss) before income taxes
    
    
    11,241
    
    
    
    (51,075
    )
    
    (39,834
    )Provision for income taxes
    
    
    4,114
    
    
    
    (19,153
    )
    
    (15,039
    )Net income (loss)
    
    $
    7,127
    
    
    $
    (31,922
    )
    $
    (24,795
    )Income (loss) per share:Basic
    
    $
    0.16
    
    
    $
    (0.71
    )
    $
    (0.55
    )Diluted
    
    $
    0.16
    
    
    $
    (0.71
    )
    $
    (0.55
    )
 11




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##### Table of Contents



Twenty-Four Weeks EndedNovember 15, 2003As Previously
    
    
    
    Effect ofConsolidated Statement of Operations
    
    Reported
    
    
    Restatement
    
    
    As Restated(dollars in thousands, except per share data)Cost of products sold
    
    $
    804,542
    
    
    $
    20,808
    
    $
    825,350Selling, delivery and administrative expenses
    
    
    748,520
    
    
    
    30,291
    
    
    778,811Depreciation and amortization
    
    
    42,921
    
    
    
    (207
    )
    
    42,714Loss on sale or abandonment of assets
    
    
    
    
    
    
    773
    
    
    773Operating income (loss)
    
    
    46,138
    
    
    
    (51,665
    )
    
    (5,527
    )Interest expense
    
    
    17,263
    
    
    
    492
    
    
    17,755Income (loss) before income taxes
    
    
    28,891
    
    
    
    (52,157
    )
    
    (23,266
    )Provision for income taxes
    
    
    10,574
    
    
    
    (19,559
    )
    
    (8,985
    )Net income (loss)
    
    $
    18,317
    
    
    $
    (32,598
    )
    $
    (14,281
    )Income (loss) per share:Basic
    
    $
    0.41
    
    
    $
    (0.73
    )
    $
    (0.32
    )Diluted
    
    $
    0.41
    
    
    $
    (0.73
    )
    $
    (0.32
    )
 Consolidated Statement of Cash Flows
 Twenty-Four Weeks EndedNovember 15, 2003As Previously
    
    
    
    Effect ofConsolidated Statement of Cash Flows
    
    Reported
    
    
    Restatement
    
    
    As Restated(dollars in thousands)Operating activitiesNet income
    
    $
    18,317
    
    
    $
    (32,598
    )
    $
    (14,281
    )Depreciation and amortization
    
    
    42,921
    
    
    
    (207
    )
    
    42,714Provision for deferred income taxes
    
    
    
    
    
    
    19,559
    
    
    19,559Loss on sale, write-down or abandonment of assets
    
    
    511
    
    
    
    773
    
    
    1,284Change in operating assets and liabilitiesInventories
    
    
    5,489
    
    
    
    283
    
    
    5,772Other current assets
    
    
    6,080
    
    
    
    (283
    )
    
    5,797Accounts payable and accrued expenses
    
    
    2,495
    
    
    
    7,916
    
    
    10,411Long-term portion of self insurance reserves
    
    
    (3,528
    )
    
    
    38,000
    
    
    34,472Other
    
    
    2,361
    
    
    
    6,002
    
    
    8,363Net cash from operating activities
    
    
    67,439
    
    
    
    327
    
    
    67,766Financing activitiesReduction of long-term debt
    
    
    (31,767
    )
    
    
    (431
    )
    
    (32,198
    )Net cash
used in financing activities
    
    
    (37,577
    )
    
    
    (431
    )
    
    (38,008
    )Net decrease in cash
    
    
    
    
    
    
    (104
    )
    
    (104
    )Cash at the beginning of period
    
    
    
    
    
    
    44,961
    
    
    44,961Cash at the end of period
    
    $
    
    
    
    $
    44,857
    
    $
    44,857
 12




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##### Table of Contents



3. Description of Business and Significant Accounting Policies
 Description of Business
    Significant Accounting Policies
 Significant Accounting Policies
 Fiscal year end
 Principles of consolidation
 Use of estimates
 Cash and cash equivalents
 Assets held for sale 
 Liabilities subject to compromise.
 13




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##### Table of Contents



Reorganization charges.
 Stock-based compensation Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation Accounting for Stock-Based Compensation  Transition and Disclosure
  Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003(dollars in thousands, except per share data)Net loss, as reported
    
    $
    (34,011
    )
    
    $
    (24,795
    )
    
    $
    (277,477
    )
    
    $
    (14,281
    )Add: Stock-based
employee compensation
expense included in
reported net income, net
of related tax effects
    
    
    135
    
    
    
    197
    
    
    
    1,055
    
    
    
    394Deduct: Total
stock-based employee
compensation expense
determined under fair
value based method for
all awards, net of
related tax effects
    
    
    (496
    )
    
    
    (1,587
    )
    
    
    (1,855
    )
    
    
    (3,547
    )Pro forma net loss
    
    $
    (34,372
    )
    
    $
    (26,185
    )
    
    $
    (278,277
    )
    
    $
    (17,434
    )Basic loss per share:As reported
    
    $
    (0.76
    )
    
    $
    (0.55
    )
    
    $
    (6.17
    )
    
    $
    (0.32
    )Pro forma
    
    
    (0.76
    )
    
    
    (0.58
    )
    
    
    (6.19
    )
    
    
    (0.39
    )Diluted loss per share:As reported
    
    
    (0.76
    )
    
    
    (0.55
    )
    
    
    (6.17
    )
    
    
    (0.32
    )Pro forma
    
    
    (0.76
    )
    
    
    (0.58
    )
    
    
    (6.19
    )
    
    
    (0.39
    )
   Contingencies Accounting for Contingencies
 14




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Newly Adopted Accounting Pronouncements Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction and Qualified Production Activities Provided by
the American Jobs Creation Act of 2004 Accounting for Income Taxes
 Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003
 Employers Disclosures about
Pensions and Other Postretirement Benefits  an amendment of FASB Statements No. 87, 88, and 106
 Recently Issued Accounting Pronouncements Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Accounting for Rental Costs
Incurred during a Construction Period
 Accounting for Conditional Asset Retirement Obligations
 an interpretation of FASB Statement No. 143
 15




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##### Table of Contents



Share-Based Payment Accounting for Stock Issued to Employees
 Exchanges of Nonmonetary Assets  An Amendment of
APB Opinion No. 29
 Inventory Costs  An Amendment of ARB No. 43,
Chapter 4 .
 4. Inventories
  November 13,
    
    
    May 29,2004
    
    
    2004(dollars in thousands)Ingredients and packaging
    
    $
    50,194
    
    
    $
    48,936Finished goods
    
    
    22,721
    
    
    
    22,965$
    72,915
    
    
    $
    71,901
 5. Property and Equipment
  November 13,
    
    
    May 29,2004
    
    
    2004(dollars in thousands)Land and buildings
    
    $
    461,551
    
    
    $
    462,668Machinery and equipment
    
    
    1,088,328
    
    
    
    1,088,9851,549,879
    
    
    
    1,551,653Less accumulated depreciation
    
    
    (762,750
    )
    
    
    (738,728
    )$
    787,129
    
    
    $
    812,925
 16




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##### Table of Contents



6. Lease Obligations
  Guarantors
Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness
of Others
 7. Goodwill and Other Intangible Assets
   November 13,
    
    
    May 29,2004
    
    
    2004(dollars in thousands)GoodwillGross carrying amount
    
    $
    215,346
    
    
    $
    215,346Impairment charge
    
    
    (215,346
    )
    
    
    Net carrying amount
    
    $
    
    
    
    $
    215,346Intangible assets with indefinite livesGross carrying amount
    
    $
    180,662
    
    
    $
    180,662Intangible assets with finite livesGross carrying amount
    
    $
    19,484
    
    
    $
    19,484Less:Accumulated amortization
    
    
    (10,406
    )
    
    
    (9,730
    )Net carrying amount
    
    $
    9,078
    
    
    $
    9,754
  17




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8. Debt
  November 13,
    
    
    May 29,2004
    
    
    2004(dollars in thousands)Secured:Post-petition credit agreement
    
    $
    
    
    
    $
    Senior
secured credit facility  pre-petition
    
    
    475,900
    
    
    
    537,626Unsecured:6% senior
subordinated convertible notes  pre-petition
    
    
    100,000
    
    
    
    Capital
leases  pre-petition
    
    
    13,946
    
    
    
    15,437589,846
    
    
    
    553,063Less:Current portion
    
    
    (483,427
    )
    
    
    (542,701
    )Pre-filing date claims included in liabilities subject to compromise
    
    
    (106,419
    )
    
    
    Long-term debt
    
    $
    
    
    
    $
    10,362
 Post-Petition Credit Agreement
    18




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##### Table of Contents



Senior Secured Credit Facility
  6% Senior Subordinated Convertible Notes
  Other Matters
   9. Derivative Instruments
   19




---



##### Table of Contents



10. Liabilities Subject to Compromise
     November 13, 2004(dollars in thousands)Accounts payable
    
    $
    132,245Taxes payable
    
    
    10,298Retirement obligations (SERP and deferred compensation)
    
    
    13,110Legal reserve
    
    
    12,931Interest bearing debt
    
    
    106,419Other
    
    
    8,914$
    283,917
 11. Employee Benefit Plans
 American Bakers Association Retirement Plan
  20




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Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003(dollars in thousands)Service cost
    
    $
    473
    
    
    $
    580
    
    
    $
    946
    
    
    $
    1,160Interest cost
    
    
    750
    
    
    
    662
    
    
    
    1,500
    
    
    
    1,324Expected return on negative plan assets
    
    
    92
    
    
    
    59
    
    
    
    184
    
    
    
    118Recognition ofPrior service cost
    
    
    98
    
    
    
    313
    
    
    
    196
    
    
    
    626Actuarial (gain) loss
    
    
    1,779
    
    
    
    (245
    )
    
    
    3,558
    
    
    
    (490
    )Net pension expense
    
    $
    3,192
    
    
    $
    1,369
    
    
    $
    6,384
    
    
    $
    2,738
 Defined Benefit Pension Plan
  21




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Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003(dollars in thousands)Service cost
    
    $
    155
    
    
    $
    162
    
    
    $
    310
    
    
    $
    324Interest cost
    
    
    860
    
    
    
    857
    
    
    
    1,720
    
    
    
    1,714Expected return on plan assets
    
    
    (1,003
    )
    
    
    (774
    )
    
    
    (2,006
    )
    
    
    (1,548
    )Recognition ofPrior service cost
    
    
    40
    
    
    
    41
    
    
    
    80
    
    
    
    82Actuarial loss
    
    
    46
    
    
    
    333
    
    
    
    92
    
    
    
    666Net pension expense
    
    $
    98
    
    
    $
    619
    
    
    $
    196
    
    
    $
    1,238
 Postretirement Health and Life Plans
   Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003(dollars in thousands)Service cost
    
    $
    674
    
    
    $
    1,151
    
    
    $
    1,348
    
    
    $
    2,302Interest cost
    
    
    1,132
    
    
    
    1,922
    
    
    
    2,264
    
    
    
    3,844AmortizationUnrecognized prior service cost (benefit)
    
    
    (1,511
    )
    
    
    (801
    )
    
    
    (3,022
    )
    
    
    (1,602
    )Unrecognized net loss
    
    
    374
    
    
    
    1,012
    
    
    
    748
    
    
    
    2,024Net postretirement benefit expense
    
    $
    669
    
    
    $
    3,284
    
    
    $
    1,338
    
    
    $
    6,568
  12. Supplemental Executive Retirement Plan
   22




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##### Table of Contents



Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003(dollars in thousands)Service cost
    
    $
    231
    
    
    $
    246
    
    
    $
    462
    
    
    $
    492Interest cost
    
    
    385
    
    
    
    348
    
    
    
    770
    
    
    
    696Recognition ofPrior service cost
    
    
    630
    
    
    
    630
    
    
    
    1,259
    
    
    
    1,260Actuarial loss
    
    
    29
    
    
    
    24
    
    
    
    58
    
    
    
    48Net periodic pension cost
    
    
    1,275
    
    
    
    1,248
    
    
    
    2,549
    
    
    
    2,496Net curtailment loss related to plan suspension
    
    
    10,341
    
    
    
    
    
    
    
    10,341
    
    
    
    Total SERP expense
    
    $
    11,616
    
    
    $
    1,248
    
    
    $
    12,890
    
    
    $
    2,496
 13. Restructuring Charges
  Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003(dollars in thousands)Severance costs
    
    $
    107
    
    
    $
    1,176
    
    
    $
    2,288
    
    
    $
    1,213Long-lived asset charges
    
    
    4,548
    
    
    
    350
    
    
    
    7,902
    
    
    
    350Other exit costs
    
    
    1,349
    
    
    
    534
    
    
    
    3,135
    
    
    
    1,129Total
    
    $
    6,004
    
    
    $
    2,060
    
    
    $
    13,325
    
    
    $
    2,692
 Fiscal 2005 Activity
    23




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Long-LivedSeverance
    
    
    Assetand Related
    
    
    ChargesBenefits
    
    
    (Credits)
    
    
    Other
    
    
    Total(dollars in thousands)Third Quarter 2003 PlanBalance May 29, 2004
    
    $
    
    
    
    $
    
    
    
    $
    1,294
    
    
    $
    1,294Expensed in Fiscal 2005
    
    
    
    
    
    
    187
    
    
    
    177
    
    
    
    364Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    (431
    )
    
    
    (431
    )Noncash Utilization in
Fiscal 2005
    
    
    
    
    
    
    (187
    )
    
    
    (543
    )
    
    
    (730
    )Balance, November 13, 2004
    
    
    
    
    
    
    
    
    
    
    497
    
    
    
    497Second Quarter 2004 PlanBalance May 29, 2004
    
    
    117
    
    
    
    
    
    
    
    
    
    
    
    117Expensed in Fiscal 2005
    
    
    
    
    
    
    124
    
    
    
    829
    
    
    
    953Cash Paid in Fiscal 2005
    
    
    (79
    )
    
    
    
    
    
    
    (829
    )
    
    
    (908
    )Noncash Utilization in
Fiscal 2005
    
    
    
    
    
    
    (124
    )
    
    
    
    
    
    
    (124
    )Balance, November 13, 2004
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    38Fourth Quarter 2004 PlanBalance May 29, 2004
    
    
    1,243
    
    
    
    
    
    
    
    3,109
    
    
    
    4,352Expensed in Fiscal 2005
    
    
    (129
    )
    
    
    
    
    
    
    1,078
    
    
    
    949Cash Paid in Fiscal 2005
    
    
    (801
    )
    
    
    
    
    
    
    (3,871
    )
    
    
    (4,672
    )Noncash Utilization in
Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, November 13, 2004
    
    
    313
    
    
    
    
    
    
    
    316
    
    
    
    629Monroe, LA Bakery ClosingExpensed in Fiscal 2005
    
    
    360
    
    
    
    200
    
    
    
    159
    
    
    
    719Cash Paid in Fiscal 2005
    
    
    (129
    )
    
    
    
    
    
    
    (159
    )
    
    
    (288
    )Noncash Utilization in
Fiscal 2005
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    (200
    )Balance, November 13, 2004
    
    
    231
    
    
    
    
    
    
    
    
    
    
    
    231Buffalo, NY Bakery
Closing & Outlet ClosingsExpensed in Fiscal 2005
    
    
    1,376
    
    
    
    2,937
    
    
    
    335
    
    
    
    4,648Cash Paid in Fiscal 2005
    
    
    (937
    )
    
    
    
    
    
    
    (159
    )
    
    
    (1,096
    )Noncash Utilization in
Fiscal 2005
    
    
    
    
    
    
    (2,937
    )
    
    
    
    
    
    
    (2,937
    )Balance, November 13, 2004
    
    
    439
    
    
    
    
    
    
    
    176
    
    
    
    615Pacific NorthwestExpensed in Fiscal 2005
    
    
    681
    
    
    
    30
    
    
    
    557
    
    
    
    1,268Cash Paid in Fiscal 2005
    
    
    (558
    )
    
    
    
    
    
    
    185
    
    
    
    (373
    )Noncash Utilization in
Fiscal 2005
    
    
    
    
    
    
    (30
    )
    
    
    (38
    )
    
    
    (68
    )Balance, November 13, 2004
    
    
    123
    
    
    
    
    
    
    
    704
    
    
    
    827
 24




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Long-LivedSeverance
    
    
    Assetand Related
    
    
    ChargesBenefits
    
    
    (Credits)
    
    
    Other
    
    
    Total(dollars in thousands)Software Write-OffExpensed in Fiscal 2005
    
    
    
    
    
    
    4,424
    
    
    
    
    
    
    
    4,424Cash Paid in Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncash Utilization in
Fiscal 2005
    
    
    
    
    
    
    (4,424
    )
    
    
    
    
    
    
    (4,424
    )Balance, November 13, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ConsolidatedBalance, May 29, 2004
    
    
    1,360
    
    
    
    
    
    
    
    4,403
    
    
    
    5,763Expensed in Fiscal 2005
    
    
    2,288
    
    
    
    7,902
    
    
    
    3,135
    
    
    
    13,325Cash Paid in Fiscal 2005
    
    
    (2,504
    )
    
    
    
    
    
    
    (5,264
    )
    
    
    (7,768
    )Noncash Utilization in
Fiscal 2005
    
    
    
    
    
    
    (7,902
    )
    
    
    (581
    )
    
    
    (8,483
    )Balance, November 13, 2004
    
    $
    1,144
    
    
    $
    
    
    
    $
    1,693
    
    
    $
    2,837
 Fiscal 2004 Activity
     25




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Long-LivedSeverance
    
    
    Assetand Related
    
    
    ChargesBenefits
    
    
    (Credits)
    
    
    Other
    
    
    TotalSecond Quarter 2003 Plan
    
    $
    1,464
    
    
    $
    (1,396
    )
    
    $
    1,747
    
    
    $
    1,815Third Quarter 2003 Plan
    
    
    2,840
    
    
    
    2,829
    
    
    
    4,929
    
    
    
    10,598Second Quarter 2004 Plan
    
    
    658
    
    
    
    641
    
    
    
    1,560
    
    
    
    2,859Third Quarter 2004 Plan
    
    
    
    
    
    
    1,200
    
    
    
    
    
    
    
    1,200Fourth Quarter 2004 Plan
    
    
    2,184
    
    
    
    407
    
    
    
    5,179
    
    
    
    7,770Monroe, LA Bakery Closing
    
    
    360
    
    
    
    200
    
    
    
    159
    
    
    
    719Buffalo,
NY Bakery Closing & Outlet Closings
    
    
    1,376
    
    
    
    2,937
    
    
    
    335
    
    
    
    4,648Pacific Northwest
    
    
    681
    
    
    
    30
    
    
    
    557
    
    
    
    1,268Software Write-Off
    
    
    
    
    
    
    4,424
    
    
    
    
    
    
    
    4,424
  Long-LivedSeverance
    
    
    Assetand Related
    
    
    ChargesBenefits
    
    
    (Credits)(1)
    
    
    Other
    
    
    TotalThird Quarter 2003 Plan
    
    $
    
    
    
    $
    192
    
    
    $
    214
    
    
    $
    406Second Quarter 2004 Plan
    
    
    (24
    )
    
    
    208
    
    
    
    234
    
    
    
    418Fourth Quarter 2004 Plan
    
    
    (281
    )
    
    
    295
    
    
    
    41
    
    
    
    55Monroe, LA Bakery Closing
    
    
    (144
    )
    
    
    178
    
    
    
    198
    
    
    
    232Buffalo, NY Bakery
Closing & Outlet
Closings
    
    
    (2
    )
    
    
    68
    
    
    
    1,053
    
    
    
    1,119
 
 (1)
    
    Excludes gains realized on subsequent sales of real property. 14. Reorganization Charges
  Twelve Weeks EndedNovember 13, 2004Reorganization
    
    
    CashCharges
    
    
    Payments(dollars in thousands)Professional fees
    
    $
    10,376
    
    
    $
    2,834Lease rejection credits
    
    
    (926
    )
    
    
    Write-off of debt fees
    
    
    2,992
    
    
    
    Reorganization charges, net
    
    $
    12,442
    
    
    $
    2,834
 26




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15. Income Taxes
  Twenty-four Weeks EndedNovember 13,
    
    November 15,2004
    
    2003Statutory federal tax rate
    
    
    35.0
    %
    
    
    35.0
    %State income tax, net
    
    
    2.7
    
    
    
    3.1Non-deductible goodwill impairment
    
    
    (22.0
    )
    
    
    Valuation allowance increase
    
    
    (11.4
    )
    
    
    Adjustments to prior year tax reserves
    
    
    2.7
    
    
    
    Other
    
    
    (0.4
    )
    
    
    0.56.6
    %
    
    
    38.6
    %
   16. Commitments and Contingencies
   27




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29




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30




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17. Earnings (Loss) per Share
 Earnings per
Share
  Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003(in thousands)Weighted average common shares outstanding:Basic
    
    
    44,966
    
    
    
    44,866
    
    
    
    44,942
    
    
    
    44,860Effect of dilutive stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted
    
    
    44,966
    
    
    
    44,866
    
    
    
    44,942
    
    
    
    44,860
 31




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18. Comprehensive Income (Loss)
  Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003(dollars in thousands)Net loss
    
    $
    (34,011
    )
    
    $
    (24,795
    )
    
    $
    (277,477
    )
    
    $
    (14,281
    )Other comprehensive income (loss):Change in fair value of cash flow hedges, net of income taxes
of $0, $1,223, $0, and $2,091, respectively
    
    
    491
    
    
    
    2,039
    
    
    
    (1,428
    )
    
    
    3,486Losses on interest rate swaps reclassified to interest
expense, net of income taxes of $0, $782, $0, and $1,795,
respectively
    
    
    
    
    
    
    1,303
    
    
    
    816
    
    
    
    2,991Commodity derivative gains reclassified to cost of products
sold, net of income taxes of $0, $630, $0, and $430,
respectively
    
    
    1,018
    
    
    
    (1,049
    )
    
    
    1,011
    
    
    
    (716
    )Minimum pension liability adjustment, net of income taxes of $0
    
    
    221
    
    
    
    
    
    
    
    221
    
    
    
    1,730
    
    
    
    2,293
    
    
    
    620
    
    
    
    5,761Comprehensive loss
    
    $
    (32,281
    )
    
    $
    (22,502
    )
    
    $
    (276,857
    )
    
    $
    (8,520
    )
 19. Segment Information
 Disclosures about Segments of an Enterprise and Related Information
  Wholesale Operations
 32




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##### Table of Contents



Retail Operations
     Twelve Weeks
    
    
    Twenty-Four WeeksEnded
    
    
    EndedConsolidated
    
    November 13, 2004
    
    
    November 13, 2004(dollars in thousands)Net SalesWholesale Operations
    
    $
    701,373
    
    
    $
    1,409,243Retail Operations
    
    
    97,338
    
    
    
    201,445Total net sales
    
    $
    798,711
    
    
    $
    1,610,688Operating Income (Loss)Wholesale Operations
    
    $
    23,319
    
    
    $
    25,734Retail Operations
    
    
    (1,038
    )
    
    
    (2,139
    )22,281
    
    
    
    23,595Corporate
    
    
    (40,259
    )
    
    
    (289,981
    )Total operating loss
    
    
    (17,978
    )
    
    
    (266,386
    )Interest expense
    
    
    9,316
    
    
    
    18,310Reorganization charges
    
    
    12,442
    
    
    
    12,442Other (income) expense
    
    
    (20
    )
    
    
    12921,738
    
    
    
    30,881Loss before income taxes
    
    
    (39,716
    )
    
    
    (297,267
    )Provision (benefit) for income taxes
    
    
    (5,705
    )
    
    
    (19,790
    )Net loss
    
    $
    (34,011
    )
    
    $
    (277,477
    )
 20. Subsequent Events
  33




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Managements
Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements
  OVERVIEW OF CERTAIN TRENDS AND EVENTS AFFECTING OPERATIONS, FINANCIAL POSITION AND LIQUIDITY
 Overview of Certain Trends and Events Affecting Operations, Financial Position and
Liquidity
 CRITICAL ACCOUNTING POLICIES
 Critical Accounting Policies
 RESTATEMENT OF FINANCIAL STATEMENTS
  RESULTS OF OPERATIONS
  Twelve Weeks Ended
    
    
    Twenty-Four Weeks EndedNovember 13,
    
    
    November 15,
    
    
    November 13,
    
    
    November 15,2004
    
    
    2003
    
    
    2004
    
    
    2003Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of products sold
    
    
    51.7
    
    
    
    51.3
    
    
    
    51.3
    
    
    
    50.2Selling, delivery and administrative expenses
    
    
    47.2
    
    
    
    49.5
    
    
    
    48.4
    
    
    
    47.3Restructuring charges
    
    
    0.8
    
    
    
    0.3
    
    
    
    0.8
    
    
    
    0.2Depreciation and amortization and loss on sale
or abandonment of assets
    
    
    2.6
    
    
    
    2.7
    
    
    
    2.6
    
    
    
    2.6Goodwill and other intangible assets impairment
    
    
    
    
    
    
    
    
    
    
    13.4
    
    
    
    Operating loss
    
    
    (2.3
    )
    
    
    (3.8
    )
    
    
    (16.5
    )
    
    
    (0.3
    )Reorganization charges
    
    
    1.6
    
    
    
    
    
    
    
    0.8
    
    
    
    Interest expense  net
    
    
    1.1
    
    
    
    1.1
    
    
    
    1.1
    
    
    
    1.1Loss before income taxes
    
    
    (5.0
    )
    
    
    (4.9
    )
    
    
    (18.4
    )
    
    
    (1.4
    )Income taxes
    
    
    (0.7
    )
    
    
    (1.8
    )
    
    
    (1.2
    )
    
    
    (0.5
    )Net loss
    
    
    (4.3
    )%
    
    
    (3.1
    )%
    
    
    (17.2
    )%
    
    
    (0.9
    )%
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Net sales.
 Gross profit.
 Selling, delivery and administrative expenses.
 Restructuring charges.
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Goodwill impairment. Goodwill and Other Intangible Assets
 Operating loss
 Reorganization charges.
 Interest expense.
 Provision for income taxes.
 CASH RESOURCES AND LIQUIDITY
 Sources of Liquidity and Capital Cash Resources and Liquidity
 CASH FLOWS
  Cash from operating activities.
 Cash used in investing activities.
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Cash used in financing activities.
 OFF-BALANCE SHEET FINANCING
  CONTRACTUAL OBLIGATIONS
     FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
  RECENT ACCOUNTING PRONOUNCEMENTS
  
 FORWARD-LOOKING STATEMENTS
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
    
    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
certification of the DIP facility;
    
    our ability to negotiate an extension (if necessary) or refinance our DIP facility,
which, pursuant to an extension, expires on June 2, 2007;
    
    our ability to develop, propose, confirm and consummate one or more plans of
reorganization with respect to the Chapter 11 proceeding;
    
    risks associated with failing to obtain court approval for one or more extensions to
the exclusivity period for us to propose and confirm one or more plans of
reorganization or with third parties seeking and obtaining court approval to terminate
or shorten any such exclusivity period, for the appointment of a Chapter 11 trustee or
to convert the Chapter 11 proceeding to a Chapter 7 proceeding;
    
    risks associated with our restructuring process, including the risks associated with
achieving the desired savings in connection with our profit center restructuring and
bakery and route consolidations to achieve the desired results;
    
    potential adverse publicity;
    
    our ability to obtain and maintain adequate terms with vendors and service providers;
    
    the potential adverse impact of the Chapter 11 proceeding on our liquidity or results of operations;
    
    risks associated with product price increases, including the risk that such actions
will not effectively offset inflationary cost pressures and may adversely impact sales
of our products;
    
    the effectiveness of our efforts to hedge our exposure to price increases with
respect to various ingredients and energy;
    
    our ability to finalize, fund and execute a going-forward business plan;
    
    our ability to recognize, attract, motivate and/or retain key executives and employees;
    
    changes in our relationship with employees and the unions that represent them;
    
    increased costs and uncertainties related to periodic renegotiation of union contracts;
    
    the results of a Securities and Exchange Commission, or SEC, investigation
concerning our financial statements following our announcement that the audit committee
of our board of directors had retained independent counsel to investigate our manner of
setting its workers compensation and other reserves;
    
    the delayed filing with the SEC of our Annual Reports on Form 10-K and of our
Quarterly Reports on Form 10-Q;
    
    successful resolution of material weaknesses in our internal controls;
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
    
    resolution of any deficiencies and implementation of software updates with respect
to our financial reporting systems;
    
    changes to dietary guidelines;
    
    the continuing effects of a low carbohydrate diet trend;
    
    the performance of our recent new product introductions, including the success of
such new products in achieving and retaining market share;
    
    commodity and energy costs;
    
    risks associated with price increases; and
    
    the outcome of legal proceedings to which we are or may become a party.
  Bankruptcy-Related Factors
 
    
    our ability to evaluate various alternatives including, but not limited to, the sale
of some or all of our assets, infusion of capital, debt restructuring and the filing
and ultimate approval of a plan of reorganization with the Bankruptcy Court, or any
combination of these options;
    
    our ability to develop and implement a successful plan of reorganization in the
Chapter 11 process;
    
    our ability to operate our business under the restrictions imposed by the Chapter 11
process and in compliance with the limitations contained in the debtor-in-possession
credit facility;
    
    the instructions, orders and decisions of the bankruptcy court and other effects of
legal and administrative proceedings, settlements, investigations and claims;
    
    changes in our relationships with suppliers and customers, including the ability to
maintain these relationships and contracts that are critical to our operations, in
light of the Chapter 11 process;
    
    the significant time that will be required by management to structure and implement
a plan of reorganization as well as to evaluate various alternatives including, but not
limited to, the sale of some or all of our assets, infusion of capital and debt
restructuring or any combination of these options, as well as our restructuring plan;
    
    our reliance on key management personnel, including the effects of the Chapter 11
process on our ability to attract and retain key management personnel;
    
    our ability to successfully reject unfavorable contracts and leases; and
    
    the duration of the Chapter 11 process.
 General Factors
 
    
    the availability of capital on acceptable terms in light of the various factors
discussed herein, including our reorganization under the Chapter 11 process;
    
    the availability and cost of raw materials, packaging, fuels and utilities, and the
ability to recover these costs in the pricing of products, improved efficiencies and
other strategies;
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
    
    increased pension, health care, workers compensation and other employee costs;
    
    actions of competitors, including pricing policy and promotional spending;
    
    increased costs, delays or deficiencies related to restructuring activities;
    
    the effectiveness of advertising and marketing spending;
    
    the effectiveness and adequacy of our information and data
systems;
    
    changes in general economic and business conditions (including in the bread and
sweet goods markets);
    
    costs associated with increased contributions to single employer, multiple employer
or multi-employer pension plans;
    
    any inability to protect and maintain the value of our intellectual property rights;
    
    future product recalls or food safety concerns;
    
    further consolidation in the retail food industry;
    
    changes in consumer tastes or eating habits;
    
    costs associated with environmental compliance and remediation;
    
    increased costs and uncertainties related to periodic renegotiation of union contracts;
    
    obligations and uncertainties with respect to the American Bakers Association Retirement Plan;
    
    the impact of any withdrawal liability arising under our multi-employer pension
plans as a result of prior actions or current consolidations;
    
    actions of governmental entities, including regulatory requirements;
    
    acceptance of new product offerings by consumers and our ability to expand existing brands;
    
    the performance of our recent new product introductions;
    
    the effectiveness of hedging activities;
    
    expenditures necessary to carry out cost-saving initiatives and savings derived from
these initiatives;
    
    changes in our business strategies;
    
    unexpected costs or delays incurred in connection with our previously announced and
other future facility closings;
    
    bankruptcy filings by customers;
    
    changes in our relationship with employees and the unions that represent them;
    
    the outcome of legal proceedings to which we are or may become a party, including
any litigation stemming from our restatement of the first, second and third quarters of
fiscal 2004, our sale of convertible notes on August 12, 2004 or events leading up to
our filing of a voluntary petition for protection under Chapter 11 of the Bankruptcy
Code;
    
    business disruption from terrorist acts, our nations response to such acts and acts of war; and
    
    other factors.
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Item 3. Quantitative and Qualitative Disclosure about Market Risk
  Commodity prices.
 Interest rates.
 
 Item 4. Controls and Procedures
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PART II. OTHER INFORMATION
 
 Item 6. Exhibits
 Exhibit No.
    
    Exhibit3.1
    
    Restated Certificate of Incorporation of Interstate Bakeries Corporation,
as amended (incorporated herein by reference to Exhibit 3.1 to Interstate
Bakeries Corporations Amendment No. 1 to its Quarterly Report on Form 10-Q
for the quarter ended March 9, 2002, filed on April 19, 2002).3.2
    
    Restated Bylaws of Interstate Bakeries Corporation (incorporated herein by
reference to Exhibit 3.1 to Interstate Bakeries Corporations Quarterly
Report on Form 10-Q for the quarter ended November 15, 2003 filed on
December 22, 2003).31.1
    
    Certification of Antonio C. Alvarez II pursuant to Rule 13a-14(a)/15d-14(a)*31.2
    
    Certification of Ronald B. Hutchison pursuant to Rule 13a-14(a)/15d-14(a)*32.1
    
    Certification of Antonio C. Alvarez II pursuant to 18 U.S.C. Section 1350*32.2
    
    Certification of Ronald B. Hutchison pursuant to 18 U.S.C. Section 1350*
 
 *
    
    Filed herewith 45




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SIGNATURES
  INTERSTATE BAKERIES CORPORATIONDated:
October 6, 2006
    
    By:
    
    /s/Antonio C. Alvarez IIAntonio C. Alvarez IIChief Executive Officer(Principal Executive Officer)Dated:
October 6, 2006
    
    By:
    
    /s/ Ronald B. HutchisonRonald B. HutchisonExecutive Vice President and Chief
Financial Officer(Principal Financial Officer)
 46