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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

|(Mark One)                                       |                                                                                         
|------------------------------------------------ | ----------------------------------------------------------------------------------------
|ý                                                | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended November 16, 2002
|OR                                              
|o                                                | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from
 to              

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|For the Quarter Ended November 16, 2002 |  | Commission File Number 1-11165
|--------------------------------------- |  | ------------------------------

INTERSTATE BAKERIES CORPORATION(Exact name of registrant as specified in its charter)

|Delaware                                                                           |  | 43-1470322                          
|---------------------------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization)                     |  | (I.R.S. Employer Identification No.)
|12 East Armour Boulevard, Kansas City, Missouri                                    |  | 64111                               
|(Address of principal executive offices)                                           |  | (Zip Code)                          
|(Registrant's telephone number, including area code)(816) 502-4000                
|(Former name, former address and former fiscal year, if changed since last report)

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

There
were 44,755,199 shares of common stock, $.01 par value per share, outstanding on December 13, 2002.

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INTERSTATE BAKERIES CORPORATION

FORM 10-Q

QUARTER ENDED NOVEMBER 16, 2002

CONTENTS

|Description                              |  | Page                                                                                 
|---------------------------------------- |  | -------------------------------------------------------------------------------------
|PART IFINANCIAL INFORMATION (UNAUDITED) |  |                                                                                      
|                                         |  | Consolidated Balance Sheets                                                          
|                                         |  | Consolidated Statements of Income                                                    
|                                         |  | Consolidated Statements of Cash Flows                                                
|                                         |  | Notes to Consolidated Financial Statements                                           
|                                         |  | Management's Discussion and Analysis of Financial Condition and Results of Operations
|                                         |  | Quantitative and Qualitative Disclosures About Market Risk                           
|                                         |  | Controls and Procedures                                                              
|                                         |  | Forward-Looking Statements                                                           
|PART IIOTHER INFORMATION                |  |                                                                                      
|                                         |  | Submission of Matters to a Vote of Security Holders                                  
|                                         |  | Exhibits and Reports on Form 8-K                                                     
|                                         |  | Signatures                                                                           
|                                         |  | Certifications                                                                       

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INTERSTATE BAKERIES CORPORATION        CONSOLIDATED BALANCE SHEETS        (UNAUDITED)

|                                     |                         | November 16,
2002                                                                                                          |                             | June 1,
2002 |          
|------------------------------------ | ----------------------- | -------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ------------ | ---------
|
|Assets                               |                         |                                                                                                                            |                             |              |          
|                                     | Current assets:         |                                                                                                                            |                             |              |          
|                                     |                         | Accounts receivable, less allowance for doubtful accounts of $4,269,000
    ($4,200,000 at June 1)                         |                             | $            | 195,200  
|                                     |                         | Inventories                                                                                                                |                             |              | 87,824   
|                                     |                         | Other current assets                                                                                                       |                             |              | 71,137   
|                                     |                         |                                                                                                                            |                             |              |          
|                                     |                         |                                                                                                                            | Total current assets        |              |          
|                                     |                         |                                                                                                                            |                             |              |          
|                                     | Property and equipment: |                                                                                                                            |                             |              |          
|                                     |                         | Land and buildings                                                                                                         |                             |              | 441,545  
|                                     |                         | Machinery and equipment                                                                                                    |                             |              | 1,084,761
|                                     |                         |                                                                                                                            |                             |              |          
|                                     |                         |                                                                                                                            | 1,526,306                   |              |          
|                                     |                         | Less accumulated depreciation                                                                                              |                             |              | (668,544 
|                                     |                         |                                                                                                                            |                             |              |          
|                                     |                         |                                                                                                                            | Net property and equipment  |              |          
|                                     |                         |                                                                                                                            |                             |              |          
|                                     | Goodwill                |                                                                                                                            |                             | 215,346      |          
|                                     | Intangibles             |                                                                                                                            |                             | 188,757      |          
|                                     | Other assets            |                                                                                                                            |                             | 7,871        |          
|                                     |                         |                                                                                                                            |                             |              |          
|                                     |                         | $                                                                                                                          | 1,623,897                   |              | $        
|                                     |                         |                                                                                                                            |                             |              |          
|Liabilities and Stockholders' Equity |                         |                                                                                                                            |                             |              |          
|                                     | Current liabilities:    |                                                                                                                            |                             |              |          
|                                     |                         | Long-term debt payable within one year                                                                                     |                             | $            | 46,608   
|                                     |                         | Accounts payable                                                                                                           |                             |              | 110,627  
|                                     |                         | Accrued expenses                                                                                                           |                             |              | 242,202  
|                                     |                         |                                                                                                                            |                             |              |          
|                                     |                         |                                                                                                                            | Total current liabilities   |              |          
|                                     |                         |                                                                                                                            |                             |              |          
|                                     | Long-term debt          |                                                                                                                            |                             | 542,466      |          
|                                     | Other liabilities       |                                                                                                                            |                             | 186,077      |          
|                                     | Deferred income taxes   |                                                                                                                            |                             | 146,129      |          
|                                     |                         |                                                                                                                            |                             |              |          
|                                     |                         |                                                                                                                            | Total long-term liabilities |              |          
|                                     |                         |                                                                                                                            |                             |              |          
|                                     | Stockholders' equity:   |                                                                                                                            |                             |              |          
|                                     |                         | Preferred stock, par value $.01 per share; authorized1,000,000 shares;
    issuednone                                    |                             |              |         
|                                     |                         | Common stock, par value $.01 per share; authorized120,000,000 shares;
    issued81,579,000 shares (80,684,000 at June 1) |                             |              | 816      
|                                     |                         | Additional paid-in capital                                                                                                 |                             |              | 587,298  
|                                     |                         | Retained earnings                                                                                                          |                             |              | 460,989  
|                                     |                         | Treasury stock, at cost36,864,000 shares (36,858,000 at June 1)                                                           |                             |              | (691,540 
|                                     |                         | Accumulated other comprehensive loss                                                                                       |                             |              | (7,775   
|                                     |                         |                                                                                                                            |                             |              |          
|                                     |                         |                                                                                                                            | Total stockholders' equity  |              |          
|                                     |                         |                                                                                                                            |                             |              |          
|                                     |                         | $                                                                                                                          | 1,623,897                   |              | $        
|                                     |                         |                                                                                                                            |                             |              |          

See
accompanying notes.

1

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INTERSTATE BAKERIES CORPORATION        CONSOLIDATED STATEMENTS OF INCOME        (UNAUDITED)

|                                              |         | Twelve Weeks Ended |         | Twenty-Four Weeks Ended |  
|--------------------------------------------- | ------- | ------------------ | ------- | ----------------------- | -
|
|
|Net sales                                     |         | $                  | 823,213 |                         | $
|                                              |         |                    |         |                         |  
|Cost of products sold                         |         |                    | 398,993 |                         |  
|Selling, delivery and administrative expenses |         |                    | 368,871 |                         |  
|Other charges                                 |         |                    | 5,041   |                         |  
|Depreciation and amortization                 |         |                    | 22,408  |                         |  
|                                              |         |                    |         |                         |  
|                                              |         |                    | 795,313 |                         |  
|                                              |         |                    |         |                         |  
|Operating income                              |         |                    | 27,900  |                         |  
|                                              |         |                    |         |                         |  
|Other income                                  |         |                    | (9      | )                       |  
|Interest expense                              |         |                    | 9,469   |                         |  
|                                              |         |                    |         |                         |  
|                                              |         |                    | 9,460   |                         |  
|                                              |         |                    |         |                         |  
|Income before income taxes                    |         |                    | 18,440  |                         |  
|Provision for income taxes                    |         |                    | 6,804   |                         |  
|                                              |         |                    |         |                         |  
|Net income                                    |         | $                  | 11,636  |                         | $
|                                              |         |                    |         |                         |  
|Earnings per share:                           |         |                    |         |                         |  
|                                              | Basic   |                    | $       | .26                     |  
|                                              |         |                    |         |                         |  
|                                              | Diluted |                    | $       | .26                     |  
|                                              |         |                    |         |                         |  

See
accompanying notes.

2

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INTERSTATE BAKERIES CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS        (UNAUDITED)

|                                      |                                                                        | Twenty-Four Weeks Ended               |                               
|------------------------------------- | ---------------------------------------------------------------------- | ------------------------------------- | ------------------------------
|
|
|Cash flows from operating activities: |                                                                        |                                       |                               
|                                      | Net income                                                             |                                       | $                             
|                                      | Depreciation and amortization                                          |                                       |                               
|                                      | Other                                                                  |                                       |                               
|                                      | Change in operating assets and liabilities:                            |                                       |                               
|                                      |                                                                        | Accounts receivable                   |                               
|                                      |                                                                        | Inventories                           |                               
|                                      |                                                                        | Other current assets                  |                               
|                                      |                                                                        | Accounts payable and accrued expenses |                               
|                                      |                                                                        |                                       |                               
|                                      |                                                                        |                                       | Cash from operating activities
|                                      |                                                                        |                                       |                               
|Cash flows from investing activities: |                                                                        |                                       |                               
|                                      | Additions to property and equipment                                    |                                       |                               
|                                      | Sale of assets                                                         |                                       |                               
|                                      | Other                                                                  |                                       |                               
|                                      |                                                                        |                                       |                               
|                                      |                                                                        |                                       | Cash from investing activities
|                                      |                                                                        |                                       |                               
|Cash flows from financing activities: |                                                                        |                                       |                               
|                                      | Addition to long-term debt                                             |                                       |                               
|                                      | Reduction of long-term debt                                            |                                       |                               
|                                      | Common stock dividends paid                                            |                                       |                               
|                                      | Stock option exercise proceeds                                         |                                       |                               
|                                      | Acquisition of treasury stock                                          |                                       |                               
|                                      | Debt fees incurred                                                     |                                       |                               
|                                      |                                                                        |                                       |                               
|                                      |                                                                        |                                       | Cash from financing activities
|                                      |                                                                        |                                       |                               
|Change in cash and cash equivalents   |                                                                        |                                       |                              
|Cash and cash equivalents:            |                                                                        |                                       |                               
|                                      | Beginning of period                                                    |                                       |                               
|                                      |                                                                        |                                       |                               
|                                      | End of period                                                          |                                       | $                             
|                                      |                                                                        |                                       |                               
|Cash payments made:                   |                                                                        |                                       |                               
|                                      | Interest                                                               |                                       | $                             
|                                      | Income taxes                                                           |                                       |                               
|Non-cash activities excluded above:   |                                                                        |                                       |                               
|                                      | Accrued deferred share award liability settled through equity issuance |                                       | $                             
|                                      | Equipment purchases financed with capital lease obligations            |                                       |                               

See
accompanying notes.

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INTERSTATE BAKERIES CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (UNAUDITED)

1.    Accounting Policies and Basis of Presentation

The accompanying unaudited consolidated financial statements should be read in conjunction with our fiscal 2002 consolidated financial statements contained in our
Annual Report on Form 10-K as filed with the Securities and Exchange Commission on August 23, 2002. Any references, unless otherwise noted, to "us", "we" and "our" refer to
Interstate Bakeries Corporation and its subsidiaries, taken as a whole.

These
consolidated financial statements include all adjustments, consisting only of normal recurring accruals (except for the accruals for other charges discussed in Note 5),
which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations for interim periods are not necessarily
indicative of results to be expected for a full year.

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Certain
reclassifications have been made to our fiscal 2002 consolidated financial statements to conform to the fiscal 2003 presentation.

2.    Inventories

The components of inventories are as follows:

November 16,
2002

June 1,
2002(In thousands)Ingredients and packaging

$
54,692

$
51,444Finished goods


27,970


23,595Other


5,162


5,100$
87,824

$
80,139


3.    Income Taxes

The reconciliation of the provision for income taxes to the statutory federal rate is as follows:

Twenty-Four Weeks EndedNovember 16,
2002

November 17,
2001Statutory federal tax

35.0
%
35.0
%State income tax

2.7

2.0Other

(.8
)
(.2
)36.9
%
36.8
%


4

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4.    Earnings Per Share

Following is a reconciliation between basic and diluted weighted average shares outstanding used in our earnings per share computations:

Twelve Weeks Ended

Twenty-Four Weeks EndedNovember 16,
2002

November 17,
2001

November 16,
2002

November 17,
2001(In thousands)Basic weighted average common
    shares outstanding

44,549

50,745

44,374

50,671Effect of dilutive stock compensation

1,046

1,288

1,173

1,081Dilutive weighted average common
    shares outstanding

45,595

52,033

45,547

51,752


Diluted
weighted average common shares outstanding exclude options on common stock and deferred shares awarded of 4,772,000 and 2,918,000 for the second quarter of fiscal 2003 and 2002,
respectively, and 4,315,000 and 3,840,000 on a year-to-date basis for fiscal 2003 and 2002, respectively, because their effect would have been antidilutive.

5.    Other Charges

During the second quarter of fiscal 2003, we incurred other charges of $5,041,000 related to liabilities incurred in conjunction with the announced closing of our
Tampa, Florida, bakery and an October 1, 2002 common stock award to a retiring executive.

During
the first quarter of fiscal 2002, we incurred other charges of $25,700,000, representing costs related to the closure of our Detroit bakery, as well as settlement of an employment
discrimination lawsuit.

6.    Derivative Instruments

We use derivative instruments, principally commodity derivatives and interest rate swap agreements, to manage certain commodity price and interest rate risks. All
financial instruments are used solely for hedging purposes and are not issued or held for speculative reasons.

We
utilize commodity hedging derivatives, generally futures and options on wheat, corn and soybean oil, to reduce our exposure to commodity price movements for future ingredient needs.
The terms of such instruments, and the hedging transactions to which they relate, generally do not exceed one year.

We
generally apply hedge accounting as allowed by Statement of Financial Accounting Standards, or SFAS, No. 133. However, we from time to time enter into derivatives which
economically hedge certain of our risks even though the criteria for hedge accounting are not met. When such criteria are not met, any impact on earnings for these hedges is recorded in the
consolidated statements of income, generally on the same line item as the gain or loss on the item being hedged.

We
enter into interest rate swap agreements with major banks and institutional lenders to manage the interest rate risk associated with our variable rate debt. During the first quarter
of fiscal 2003, we amended interest rate swap agreements with a notional amount of $170,000,000, extending the terms by

5

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one year and reducing the fixed interest rates. Neither party was required to make a cash payment to effect these amendments. At the date of the amendments, these instruments had a loss, net of
income taxes, of $2,817,000 accumulated in other comprehensive income(loss), or OCI, which will be reclassified into interest expense over the remaining term of the original hedged period. This
reclassification will be offset by the change in fair value of the new swap agreements over the term of these agreements. The net-of-tax amount reclassified into interest
expense related to this item for the second quarter of fiscal 2003 was $793,000. The amended swap agreements have been redesignated as cash flow hedges of variable rate debt.

Considering
these amendments, our current interest rate swaps fix interest rates on $440,000,000 for 4.22% to 6.91% with termination dates ranging from April to August 2004. These
swap agreements generally qualify for cash flow hedge accounting as defined by SFAS No. 133 with changes in fair value of the swap agreements recorded to OCI on a quarterly basis.

At
November 16, 2002, we had accumulated losses of $7,775,000, net of income taxes and amounts reclassified to earnings, related to interest rate swaps and recorded to OCI, with
offsetting entries to accrued expenses and other liabilities. The changes to OCI related to hedging activities for the second quarter and the year-to-date periods of fiscal
2003 were as follows:

Twelve Weeks
Ended
November 16,
2002

Twenty-Four Weeks
Ended
November 16,
2002(In thousands)Accumulated OCI at June 1, 2002, net of income taxes
    of $2,974,000

$


$
(4,957
)Accumulated OCI at August 24, 2002, net of income
    taxes of $4,688,000


(7,748
)

Losses on interest rate swaps reclassified to interest
    expense


2,098


3,599Commodity derivative losses reclassified to cost of
    products sold





178Change in fair value of cash flow hedges


(2,125
)

(6,595
)Accumulated OCI at November 16, 2002, net of income
    taxes of $4,705,000

$
(7,775
)
$
(7,775
)


The
only item which is currently reflected in OCI is the effect of accounting for these derivative instruments. Comprehensive income for the second quarter of fiscal 2003 and 2002 was
$11,609,000 and $14,343,000, respectively, while year-to-date comprehensive income was $35,949,000 and $22,034,000 for fiscal 2003 and 2002, respectively.

Of
these losses recorded in OCI at November 16, 2002, approximately $5,901,000, net of income taxes, is expected to be reclassified to earnings during the next 12 months.

At
November 16, 2002, we also had accumulated losses on commodity derivatives of $539,000, net of income taxes, that were recorded to cost of products sold with an offsetting
entry to accrued expenses.

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7.    Goodwill and Other Intangibles

Included on our consolidated balance sheets as of November 16, 2002 and June 1, 2002 were the following acquired intangible assets:

|                                                                             |  | November 16, 2002 |         | June 1, 2002 |  
|---------------------------------------------------------------------------- |  | ----------------- | ------- | ------------ | -
|
|
|Goodwill                                                                     |  | $                 | 215,346 |              | $
|                                                                             |  |                   |         |              |  
|Intangibles with indefinite lives (generally trademarks
    and trade names) |  | $                 | 176,409 |              | $
|                                                                             |  |                   |         |              |  
|Intangibles with finite lives                                                |  | $                 | 19,812  |              | $
|                                                                             |  |                   |         |              |  

Intangible amortization for the second quarter of fiscal 2003 and 2002 was $330,000 and $364,000, respectively, while year-to-date intangible amortization for
fiscal 2003 and 2002 was $667,000 and $732,000, respectively. Of these amounts, $184,000 for the second quarter and $369,000 year-to-date in
both fiscal 2003 and 2002 were recorded as a reduction of net sales, with the remainder recorded to amortization expense in the consolidated statements of income. Intangible amortization for fiscal
2003 through fiscal 2007 is estimated at $1,100,000 to $1,500,000 per year, of which approximately $800,000 per year will be recorded as a reduction of net sales.

8.    Capital Lease Obligations

During the second quarter of fiscal 2003, we recorded capital lease obligations of $11,688,000 incurred to finance the purchase of machinery and equipment. The
scheduled annual repayment of the capital lease obligations remaining at November 16, 2002, which are included in long-term debt on the consolidated balance sheets, amount to $1,169,000 in
fiscal 2003, $2,446,000 in fiscal 2004, $3,747,000 in fiscal 2005, $2,186,000 in fiscal 2006 and $1,213,000 in fiscal 2007.

9.    Deferred Share Award

During the second quarter of fiscal 2003, we granted the right to receive in the future up to 150,000 shares of our common stock under the 1996 Stock Incentive
Plan, with a weighted average fair value at the date of grant of $27.00 per share. The deferred shares, which are accruing dividends in the form of additional shares, vest ratably after one, two and
three years of continued employment. Compensation expense related to this award was $174,000 for the second quarter of fiscal 2003.

10.    Newly Adopted Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." This statement, which supersedes SFAS No. 121 and was adopted by us at the beginning of fiscal 2003, provides revised guidance regarding the recognition and measurement of impairment
losses related to certain long-lived assets and discontinued operations. The adoption of this statement had no impact on our financial position or net income.

In
April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinds both SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt" and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." In
so doing, SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment of debt be classified as an

7

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extraordinary item, unless the criteria in Accounting Principles Board Opinion No. 30 are met. SFAS No. 145 also amends SFAS No. 13, "Accounting for Leases" to require that
certain lease modifications that have economic effects similar to sale-leaseback transactions are accounted for in the same manner
as sale-leaseback transactions and amends other existing authoritative pronouncements to make various technical corrections. The provisions of SFAS No. 145 related to the amendment of SFAS
No. 13 were effective for us for transactions occurring after May 15, 2002, while all other provisions of SFAS No. 145 were adopted by us effective with the beginning of fiscal
2003 on June 2, 2002. The adoption of the provisions of this statement had no impact on our financial position or net income.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement addresses financial accounting and reporting
for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the
liability is incurred, and is effective for us for exit or disposal activities initiated after the beginning of the second quarter of fiscal 2003, the date of our adoption of this statement.

11.    Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which requires that the fair value of a liability for an
asset retirement obligation be recognized when it is incurred. The related asset retirement costs are capitalized as part of the long-lived asset's carrying value. SFAS No. 143 will be
effective for us during fiscal 2004. We are currently assessing the impact which the adoption of this statement will have on our consolidated financial statements, but we do not expect the impact to
be material.

In
November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." This interpretation clarifies disclosures required to be made by a guarantor in its interim and annual financial statements about obligations under certain of its issued
guarantees. In addition, the interpretation clarifies that a guarantor is required to recognize, at the inception of certain types of guarantees, a liability for the fair value of the obligation
undertaken in issuing these guarantees. The recognition and measurement provisions of this interpretation are applicable to guarantees issued or modified after December 31, 2002, and the
disclosure requirements are effective for our third quarter fiscal 2003 consolidated financial statements. We are currently assessing the impact which the adoption of this interpretation will have on
our consolidated financial statements.

8

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INTERSTATE BAKERIES CORPORATION        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are discussed in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal
year ended June 1, 2002. The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes. These estimates and assumptions are evaluated on an on-going basis and
are based upon many factors including historical experience, consultation with outside professionals, such as actuaries, and management's judgment. Actual results could differ from any estimates made
and results could be materially different if different assumptions or conditions were to prevail.

Our
critical accounting policies and estimates, involving those areas of financial statement preparation which are most important to the portrayal of our financial condition and results
and which require management's most difficult, subjective and complex judgments, are discussed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of
our Annual Report on Form 10-K for the fiscal year ended June 1, 2002. Readers are encouraged to review these critical accounting policies and estimates in conjunction with the review of
this accompanying Form 10-Q for the quarter ended November 16, 2002.

RESULTS OF OPERATIONS

Extended shelf life program.    Our extended shelf life program is discussed more fully in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of our Annual Report on Form 10-K for the fiscal year ended June 1, 2002 and readers are encouraged to review that information in conjunction
with this discussion of results of operations.

Net
sales.    Net sales for the second quarter of fiscal year 2003, the twelve weeks ended November 16, 2002, were $823,213,000, a decrease of $2,859,000, or .3%, from
net sales of $826,072,000 in fiscal year 2002. Year-to-date net sales for fiscal 2003 increased $11,073,000, or .7%, to $1,662,187,000, from net sales of $1,651,114,000, in fiscal 2002. The decline in
net sales for the second quarter reflected comparable selling prices and a unit volume decline of approximately 1.0%, partially offset by strong thrift store sales. The year-to-date increase reflected
a slight overall unit volume gain and stable selling prices.

Gross
profit.    Gross profit was 51.5% of net sales for the second quarter of fiscal year 2003, down from 52.3% of net sales in fiscal 2002. Year-to-date gross profit was
52.0% of net sales, compared to 52.6% in the prior year. Our fiscal 2003 gross profit margins were negatively impacted by higher ingredient costs, including cocoa, sweeteners and the ingredient costs
associated with producing our extended shelf life products, as well as higher employee costs for health care and pension benefits. The gross profit margin for the second quarter of fiscal 2003 was
further negatively impacted by lower unit sales volume.

Selling,
delivery and administrative expenses.    Selling, delivery and administrative expenses were $368,871,000, representing 44.8% of net sales, for the second quarter of
fiscal 2003, up somewhat from fiscal 2002's selling, delivery and administrative expenses of $368,278,000, or 44.6% of net sales. Year-to-date selling, delivery and administrative expenses for fiscal
2003 amounted to $735,583,000, or 44.3% of net sales, a slight improvement on a percent of net sales basis from $732,519,000, or 44.4% of net sales, in the prior year. The unfavorable variance for the
second quarter reflects the impact that lower volume has on our ability to absorb fixed costs, as well as higher costs for employee health care and

9

---

pension benefits, partially offset by the favorable impact of a reduced number of delivery routes resulting from our extended shelf life program. On a year-to-date basis, the favorable impact of
having fewer routes more than offset higher benefit costs experienced in fiscal 2003.

Other
charges.    Other charges of $5,041,000 in the second quarter of fiscal 2003 relate to liabilities incurred in conjunction with the announced closing of our Tampa,
Florida, bakery and an October 1, 2002 common stock award to our former Chief Executive Officer. Other charges of $25,700,000 in fiscal 2002 relate to the closure of our Detroit bakery and the
settlement of employment discrimination litigation related to our San Francisco bakery.

Operating
income.    Based upon the above factors, operating income for the second quarter of fiscal 2003 was $27,900,000, or 3.4% of net sales, down from the prior year's
operating income of $41,640,000, or 5.0% of net sales. Excluding the other charges described above, fiscal 2003 second quarter operating income was $32,941,000, or 4.0% of net sales. Year-to-date
operating income improved to $79,391,000, or 4.8% of net sales, in fiscal 2003 from $66,892,000, or 4.1% of net sales, in fiscal 2002. Before other charges, year-to-date operating income in fiscal
2003 was $84,432,000, or 5.1% of net sales compared to $92,592,000, or 5.6% of net sales, in fiscal 2002.

Interest
expense.    Interest expense for the second quarter of fiscal 2003 was $9,469,000, up $1,365,000 from interest expense in fiscal 2002 of $8,104,000. Year-to-date
interest expense in fiscal 2003 was $18,000,000, compared to interest expense of $18,017,000 in fiscal 2002. For these periods, the impact on interest expense of slightly higher borrowing levels
during fiscal 2003 was offset by the impact of lower interest rates. However, during the second quarter of fiscal 2003, we reclassified $1,273,000 to interest expense from other comprehensive
income(loss) resulting from the amendment of some of our interest rate swap agreements (see Note 6 to the consolidated financial statements). Year-to-date interest expense for fiscal 2002 included
debt fee amortization of approximately $2,000,000 related to our previous debt outstanding.

Income
tax expense.    The effective income tax rates were 36.9% and 36.8% for fiscal 2003 and fiscal 2002, respectively.

Net
income.    Net income for the second quarter of fiscal 2003 was $11,636,000, or $.26 per diluted share, compared to net income of $21,249,000, or $.41 per diluted share in
fiscal 2002. Excluding the impact of other charges, fiscal 2003 second quarter earnings per diluted share were $.33. On a year-to-date basis, net income was $38,767,000, or $.85 per diluted share,
compared to $31,047,000, or $.60 per diluted share, for fiscal 2002. The fiscal 2003 and fiscal 2002 year-to-date results included other charges detailed above which reduced earnings per diluted share
by $.07 and $.31, respectively.

CAPITAL RESOURCES AND LIQUIDITY

Cash from operating activities for the twenty-four weeks ended November 16, 2002 was $81,763,000, down $23,261,000 from cash generated in fiscal 2002 of
$105,024,000. This decrease was primarily attributable to working capital variances, notably the timing of payments on accounts payable and accrued expenses. Cash from operating activities, along with
proceeds from stock option exercises, was used to fund net capital expenditures of $44,001,000, pay common stock dividends of $6,212,000 and reduce debt outstanding by $43,552,000.

Our
planned cash needs for fiscal 2003 include approximately $211,997,000, consisting of $39,500,000 of required debt repayments, $2,095,000 of obligations under capital leases,
$68,202,000 of

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obligations under operating leases, $12,200,000 of common stock dividends and $90,000,000 of capital expenditures, including funds needed to establish a new bakery near Las Vegas, Nevada. We believe
cash from ongoing operations, along with our borrowing capacity under our credit facilities, will be sufficient to fund our currently anticipated cash needs through fiscal 2003. We may incur
additional expenditures for acquisitions if opportunities become available. In addition, we may purchase shares under our stock repurchase program. We may fund acquisitions through the issuance of our
common stock or through additional sources of financing. If we are not able to fund our requirements through
cash flow from operations, we may seek additional sources of financing. In either case, additional sources of financing may not be available when needed or may not be available on acceptable terms.

We
amended and extended some of our interest rate swap agreements during the first quarter of fiscal 2003. Our interest rate swap agreements currently fix interest rates on $440,000,000
from 4.22% to 6.91% with termination dates ranging from April to August 2004.

We
have seen commodity costs for some of our principal ingredients, primarily sweeteners and cocoa, rise sharply over the past several months and based upon current market conditions, we
cannot be assured that these costs will return to more historically normal levels in the near future. We currently have coverage on the majority of our major ingredients through the end of our fiscal
year at costs exceeding those experienced in the prior fiscal year. We have historically attempted to offset cost increases with selling price increases and operational efficiencies. However, if we
are not successful in offsetting these increases with pricing and efficiencies, such cost increases could have an adverse effect on our financial results.

The
following is a summary of certain of our contractual obligations as of November 16, 2002 and the anticipated impact these obligations will have on future cash flows:

Payments Due By Fiscal Year Under Certain Contractual Obligations

|Fiscal Year |       | Total |         | Revolving Credit Line(a) |   | Long-Term Debt(a) |        | Capital Leases |         | Operating Leases |   | Unconditional Purchase Obligations(b)
|----------- | ----- | ----- | ------- | ------------------------ | - | ----------------- | ------ | -------------- | ------- | ---------------- | - | -------------------------------------
|
|2003        |       | $     | 227,191 |                          | $ |                  |        | $              | 19,875  |                  | $ | 1,169                                
|2004        |       |       | 157,598 |                          |   |                  |        |                | 53,813  |                  |   | 2,446                                
|2005        |       |       | 101,154 |                          |   |                  |        |                | 58,500  |                  |   | 3,747                                
|2006        |       |       | 184,200 |                          |   |                  |        |                | 156,937 |                  |   | 2,186                                
|2007        |       |       | 253,158 |                          |   | 27,000            |        |                | 208,500 |                  |   | 1,213                                
|Thereafter  |       |       | 76,404  |                          |   |                  |        |                | 53,688  |                  |   |                                     
|            |       |       |         |                          |   |                   |        |                |         |                  |   |                                      
|            | Total |       | $       | 999,705                  |   | $                 | 27,000 |                | $       | 551,313          |   | $                                    
|            |       |       |         |                          |   |                   |        |                |         |                  |   |                                      

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NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In October 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This statement, which supersedes SFAS No. 121 and was adopted by us at the beginning of fiscal 2003, provides revised guidance
regarding the recognition and measurement of impairment losses related to certain long-lived assets and discontinued operations. The adoption of this statement had no impact on our financial position
or net income.

In
April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinds both SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt" and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." In
so doing, SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment of debt be classified as an extraordinary item, unless the criteria in Accounting Principles
Board Opinion No. 30 are met. SFAS No. 145 also amends SFAS No. 13, "Accounting for Leases" to require that certain lease modifications that have economic effects similar to
sale-leaseback transactions are accounted for in the same manner as sale-leaseback transactions and amends other existing authoritative pronouncements to make various technical corrections. The
provisions of SFAS No. 145 related to the amendment of SFAS No. 13 were effective for us for transactions occurring after May 15, 2002, while all other provisions of SFAS
No. 145 were adopted by us effective with the beginning of fiscal 2003. The adoption of the provisions of this statement had no impact on our financial position or net income.

In
June 2002, the FASB issued SFAS No. 145, "Accounting for Costs Associated with Exit or Disposal Activities." This statement addresses financial accounting and reporting
for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the
liability is incurred, and is effective for us for exit or disposal activities initiated after the beginning of the second quarter of fiscal 2003, the date of our adoption of this statement.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which requires that the fair value of a liability for an
asset retirement obligation be recognized when it is incurred. The related asset retirement costs are capitalized as part of the long-lived asset's carrying
value. SFAS No. 143 will be effective for us during fiscal 2004. We are currently assessing the impact which the adoption of this statement will have on our consolidated financial statements,
but we do not expect the impact to be material.

In
November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." This interpretation clarifies disclosures required to be made by a guarantor in its interim and annual financial statements about obligations under certain of its issued
guarantees. In addition, the interpretation clarifies that a guarantor is required to recognize, at the inception of certain types of guarantees, a liability for the fair value of the obligation
undertaken in issuing the guarantees. The recognition and measurement provisions of this interpretation are applicable to guarantees issued or modified after December 31, 2002, and the
disclosure requirements are effective for our third quarter

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fiscal 2003 consolidated financial statements. We are currently assessing the impact which the adoption of this interpretation will have on our consolidated financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks relative to commodity price fluctuations and interest rate changes. We actively manage these risks through the use of forward
purchase contracts and derivative financial instruments. As a matter of policy, we use derivative financial instruments only for hedging purposes, and the use of derivatives for trading and
speculative purposes is prohibited.

Commodity
Prices.    Commodities we use in the production of our products are subject to wide price fluctuations, depending upon factors such as weather, crop production,
worldwide market supply and demand and government regulation.

To
reduce the risk associated with commodity price fluctuations, primarily for wheat, corn, sugar, soybean oil and certain fuels, we sometimes enter into forward purchase contracts and
commodity futures and options in order to fix ingredient prices for future periods. A sensitivity analysis was prepared and, based upon our commodity-related derivatives position as of
November 16, 2002, an assumed 10% adverse change in commodity prices would not have a material effect on our fair values, future earnings or cash flows.

Interest
Rates.    We enter into interest rate swap agreements to manage the interest rate risk associated with variable rate debt instruments. Our current interest rate swap
agreements fix interest rates on $440,000,000 from 4.22% to 6.91% with termination dates ranging from April to August 2004. Based upon a sensitivity analysis at November 16, 2002,
an assumed 10% adverse change in interest rates would not have a material impact on our fair values, future earnings or cash flows.

CONTROLS AND PROCEDURES

Within the 90-day period prior to the date of this report, we conducted an evaluation, under the supervision and with the participation of management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There have been no significant changes in our internal
controls or in other factors that could significantly affect internal controls subsequent to the date our Chief Executive Officer and Chief Financial Officer completed their evaluation.

FORWARD-LOOKING STATEMENTS

Some information contained in this Quarterly Report on Form 10-Q may contain forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are contained principally in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." The use
of any of the words "anticipate," "continue," "estimate," "expect," "may," "will," "project," "should," "could," "would," "plan," "intend," "predict," "believe," "potential" and similar expressions
are intended to identify uncertainties. We believe the expectations reflected in those forward-looking statements are reasonable. However, we cannot assure you that these expectations will prove to be
correct. Forward-looking statements include statements relating to, among other things: operating and financial benefits from our portfolio of brands and our distribution system; availability and
costs of raw materials, packaging, fuel and power; savings from

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productivity and product quality improvements, including our extended shelf life program; our cash needs, including capital expenditures, dividends, debt repayment, capital lease obligations and
operating lease commitments; compliance with our credit facility covenants; compliance with government regulations, including environmental and employment regulations; relationships with our employees
and the unions that represent them; the Las Vegas bakery project; general economic conditions, including interest rates; and the outcome of legal proceedings to which we are or may become a party.

Our
actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors that may impact our business or operations. Many of
those factors are beyond our ability to control or predict. Factors that could cause actual results to differ materially include, but are not limited to, increased costs or delays in completion of the
Las Vegas bakery project or other problems related thereto; actions of competitors, including pricing policy; the availability and costs of raw materials, fuels and utilities, and the ability to
recover these costs in the pricing of products; the availability of capital on acceptable terms; changes in our business strategies, including our ability to continue to participate in industry
consolidation and to integrate successfully businesses we acquire; changes in general economic and business conditions (including in the bread and sweet goods markets); further consolidation in the
food retail industry; future product recalls or safety concerns; costs associated with environmental compliance and remediation; increased costs and
uncertainties related to periodic renegotiation of union contracts; actions of governmental entities, including regulatory requirements; the outcome of legal proceedings to which we are or may become
a party and other factors. You should not unduly rely on these forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q and we are not
obligated to publicly update or revise these forward-looking statements to reflect future events or developments except as required by law. All subsequent written and oral forward-looking statements
attributable to us and persons acting on our behalf are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q.
We have provided additional information in our Annual Report on Form 10-K for our fiscal year ended June 1, 2002, filed with the Securities and Exchange Commission, which readers are
encouraged to review, concerning other factors that could cause actual results to differ materially from those indicated in the forward-looking statements.

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PART II

ITEM 4Submission of Matters to a Vote of Security Holders

Our annual meeting of stockholders was held in Kansas City, Missouri, on September 24, 2002. 39,177,191 shares of Common Stock, 89.0% of outstanding
shares, were represented in person or by proxy.

The
following three Class III Directors were elected to a three-year term expiring in 2005:

Number of Shares VotedNameFor

WithheldG. Kenneth Baum

37,649,473

1,527,718E. Garrett Bewkes, Jr.

37,596,544

1,580,647James R. Elsesser

38,225,340

951,851


The
selection of Deloitte & Touche LLP as independent auditors was approved: 35,070,046 shares voted in favor; 4,098,494 shares voted against and 8,651 shares abstained (including
broker non-votes).

ITEM 6Exhibits and Reports on Form 8-K





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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                        |  | INTERSTATE BAKERIES CORPORATION(Registrant)
|----------------------- |  | -------------------------------------------
|DATE: December 20, 2002 |  | By:                                        
|DATE: December 20, 2002 |  | By:                                        

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CERTIFICATIONS

I,
James R. Elsesser, certify that:

|Date: December 20, 2002                                       | 
|------------------------------------------------------------- | 
|/s/JAMES R. ELSESSERJames R. Elsesser
Chief Executive Officer | 

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I, Frank W. Coffey, certify that:

|Date: December 20, 2002                                                             | 
|----------------------------------------------------------------------------------- | 
|/s/FRANK W. COFFEYFrank W. Coffey
Senior Vice President and
Chief Financial Officer | 

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