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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended May 30, 1998
----------------------------------------------------
OR
[ ] 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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Commission File Number 1-11165
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INTERSTATE BAKERIES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 43-1470322
- -------------------- -----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) 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
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock,
$.01 par value per share New York Stock Exchange
- ------------------------ -------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
----------------------------------------------------
(Title of class)
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 X No
--------- ---------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
[ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $1,090,609,823 as of August 7, 1998. For these purposes only,
the registrant has assumed that shares of Common Stock, $.01 par value per
share, that may be deemed to be beneficially owned by certain members of the
Board of Directors constitute shares held by affiliates of the registrant.
There were 72,164,135 shares of Common Stock, $.01 par value per share,
outstanding as of August 7, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Part and Item Document Incorporated
of Form 10-K: By Reference
------------- ---------------------
Part II, Item 5 Annual Report*
Part II, Item 6 Annual Report*
Part II, Item 7 Annual Report*
Part II, Item 8 Annual Report*
Part III, Item 10 Proxy Statement**
Part III, Item 11 Proxy Statement**
Part III, Item 12 Proxy Statement**
Part III, Item 13 Proxy Statement**
- -------------------------------------------------------------------
* Refers to portions of Registrant's annual report to security
holders with respect to the fiscal year ended May 30, 1998.
** Refers to portions of Registrant's definitive proxy statement
filed on August 20, 1998.
FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made in this Report,
including those under the captions "Business," "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and elsewhere are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, and are subject to
the safe harbor created by that Act. Such forward-looking statements include,
without limitation, the future availability and prices of raw materials, the
availability of capital on acceptable terms, the competitiveness of the bread
and cake industry, potential environmental liabilities and other statements
contained herein that are not historical facts. Because such forward-looking
statements involve risks and uncertainties, there are important factors that
could cause actual results to differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, changes in
general economic and business conditions (including in the bread and cake
markets), Interstate Bakeries Corporation's ability to recover its raw
material costs in the pricing of its products, the availability of capital on
acceptable terms, actions of competitors and governmental entities, the extent
to which Interstate Bakeries Corporation is able to develop new products and
markets for its products, the time required for such development, the level of
demand for such products, changes in Interstate Bakeries Corporation's
business strategies and other factors.
PART I
Item 1. Business
- ------- --------
General
- -------
Interstate Bakeries Corporation ("the Company"), a Delaware corporation
incorporated in 1987, is the largest baker and distributor of fresh bakery
products in the United States. The Company produces, markets, distributes and
sells a wide range of breads, rolls, snack cakes, donuts, sweet goods and
related products. These products are sold under a number of national brand
names, such as "Wonder ," "Hostess " and "Home Pride ," as well as regional
brand names, including "Butternut ," "Dolly Madison " and "Merita ". Based on
independent publicly available market data, "Wonder " white bread and "Home
Pride " wheat bread are the number one and two selling branded breads sold in
the United States. "Hostess " products, including "Twinkies " and "Ho-Hos ,"
are among the leading snack cake products sold in the United States.
The principal executive offices of the Company are located at 12 East
Armour Boulevard, Kansas City, Missouri 64111, and the telephone number is
(816)502-4000.
The Company distributes its products in markets representing
approximately 90% of the United States population. The Company operates 69
bakeries and approximately 1,500 thrift stores and employs over 34,000 people.
Its sales force delivers products directly from the Company's over 1,300
distribution centers to more than 200,000 food outlets and stores.
The Company or its predecessors have baked and distributed fresh bread
and cake products since 1927. The Company has grown to its present size
primarily through acquisitions of other baking businesses. In its 1988 fiscal
year, the Company underwent a change in control through a leveraged buyout
transaction and acquired 10 bakeries in the Southeastern United States. In
July 1991, the Company returned to the public market by issuing shares of
Common Stock. In July 1995, the Company acquired Continental Baking Company
("CBC") from Ralston Purina Company ("Ralston") for $220,000,000 in cash and
33,846,154 shares of Common Stock. Since the acquisition of CBC, the Company
has taken significant steps to continue to build and capitalize on the brand
equity in the "Wonder " and "Hostess " brands. The Company has also worked to
realize cost savings from the CBC acquisition and to achieve economies of
scale in its operations. On July 29, 1997, Ralston issued $479,953,687.50 of
7% Stock Appreciation Income Linked Securities ("SAILS"), which are
exchangeable at maturity, at the option of Ralston, for cash or up to
15,498,000 shares of the Company's Common Stock. Pursuant to the SAILS
transaction, the Company repurchased 2,000,000 shares of its Common Stock from
Ralston for $60,079,375, or $30.0396875 per share, which amount was the
closing sales price of the Common Stock on the New York Stock Exchange on July
23, 1997 of $30.96875 per share, less a 3% discount.
During 1998, the Company has purchased from Ralston 1,200,000 shares of the
Company's Common Stock at a average price of $31.375 per share.
On September 23, 1997, the Company declared a two-for-one stock split effected
in the form of a stock dividend payable November 3, 1997 to stockholders of
record of the Company's common stock at the close of business October 15,
1997. All share and per share amounts have been adjusted to reflect this
stock split.
Products and Brands
- -------------------
The Company produces, markets, distributes and sells white breads,
variety breads, crusty breads, reduced calorie breads, English muffins, rolls
and buns under a number of well-known national brand names, including
"Wonder," "Home Pride" and "Bread du Jour," and regional brand names
including "Beefsteak," "Buttermaid," "Butternut," "Colombo," "Cotton's
Holsum," "DiCarlo," "Eddy's," "Emperor Norton," "Holsum," "J.J. Nissen,"
"Merita," "Millbrook Farms," "Parisian," "Sweetheart," "Toscano" and
"Weber's"; bagels under the brand name "Braun's"; and croutons under the
brand names "Mrs. Cubbison's" and "Marie Callender's". The Company's snack
cakes, donuts, sweet rolls, snack pies, breakfast pastries, variety cakes,
large cakes and shortcakes are also sold under a number of well-known national
and regional brand names, including "Hostess" and "Dolly Madison." The
Company is also a baker and distributor of "Roman Meal" breads, including
traditional Roman Meal bread, Roman Meal variety breads, Roman Meal light
breads, Roman Meal buns, rolls and English muffins, and Sunmaid raisin bread.
The Company's various brands are positioned across a wide spectrum of consumer
categories and price points.
The Company believes that its brand trademarks such as "Wonder,"
"Hostess," "Home Pride," "Butternut" and "Dolly Madison" and product
trademarks such as "Twinkies," "Ho-Hos" and "Zingers" are of material
importance to its strategy of brand building. The Company also owns a number
of patents related to the processes used in making the Company's bread and
cake products. The Company takes appropriate action from time to time against
third parties to prevent infringement of its trademarks and other intellectual
property. The Company also enters into confidentiality agreements from time
to time with employees and third parties as necessary to protect formulas and
processes used in producing the Company's products.
Marketing and Distribution
- --------------------------
The majority of the Company's bread sales are through supermarkets, while
the Company's cake products are sold principally through supermarkets and
convenience stores. Cake sales tend to be somewhat seasonal, with a
historically weak winter period, which the Company believes is attributable to
home baking and consumption patterns during the holiday season. Spring and
early summer months are historically stronger due to increased sales of
shortcake products during the fresh strawberry season. No single customer
accounts for more than 5% of the Company's net sales.
The Company's marketing and advertising campaigns are conducted through
targeted television and radio advertising, coupons in newspapers and other
printed media.
The Company distributes its products in markets representing
approximately 90% of the United States population, with its strongest presence
in southern California, the Pacific Northwest, the upper Midwest, the
Northeast, the Mountain States, the Middle Atlantic States and Florida.
With plants and distribution centers across the United States, the Company is
located close to the major marketplaces enabling efficient delivery and
superior customer service. The Company does not keep a backlog of inventory
as its fresh bakery products are promptly distributed to its customers after
being produced.
The Company's fresh bakery products are delivered from the Company's
network of 69 bakeries to its over 1,300 distribution centers. The products
are then delivered primarily to supermarkets and convenience stores by the
Company's sales force on its more than 11,000 delivery routes. Unsold
products are picked up by the Company's sales force and delivered to the
Company's more than 1,500 thrift stores for retail sale. Thrift store sales
represented approximately 12% of the net sales of the Company during the
fifty-two week period ended May 30, 1998.
Sources and Availability of Raw Materials
- -----------------------------------------
The ingredients of bread and cake products, principally flour, sugar and
edible oils, are readily available from numerous sources. Generally, the
Company purchases its commodity requirements on the spot markets, although the
Company attempts to lock in prices for raw materials through advance purchase
contracts, generally not longer than one year in duration, when prices are
expected to increase. Through its program of central purchasing of baking
ingredients and packaging materials, the Company believes it is able to
utilize its national presence to obtain competitive prices. The prices for
raw materials are dependent on a number of factors including the results of
crop production, transportation and processing costs, governmental legislation
and policies and export sales demand. Although commodity prices have been
volatile and may continue to be volatile, historically, the Company has been
able to recover the majority of its commodity cost increases through
increasing prices, switching to a higher-margin revenue mix and obtaining
additional operating efficiencies.
Employees
- ---------
The Company employs over 34,000 people. Approximately 80% of the
Company's employees are covered by over 600 union contracts. Most of the
Company's unionized workers are members of either the International
Brotherhood of Teamsters or the Bakery, Confectionery and Tobacco Workers
International Union. None of the 600 individual collective bargaining
agreements is material to the Company's consolidated operations. The Company
believes it has good relations with its union and nonunion employees.
Competition
- -----------
The Company faces intense competition in all of its markets from large,
national bakeries and smaller regional operators, as well as from supermarket
chains with their own bakeries or private label products and grocery stores
with their own in-store bakeries. Competition is based on product quality,
price, brand loyalty, effective promotional activities and the ability to
identify and satisfy emerging consumer preferences. Customer service,
including frequency of deliveries and maintenance of fully stocked shelves, is
also an important competitive factor and is central to the competition for
retail shelf space among bread and cake product distributors. The Earthgrains
Company, Bestfoods and Flowers Industries, Inc. are the Company's largest
bread competitors, each marketing bread products under various brand names.
McKee Foods Corp., Tasty Baking Co. and Entenmann's are the largest
competitors of the Company with respect to cake sales. The Company from time
to time experiences price pressure in certain of its markets as a result of
competitors' promotional pricing practices. However, the Company believes
that its geographic diversity helps to limit the effect of regionally-based
competition.
Governmental Regulation; Environmental Matters
- ----------------------------------------------
The Company's operations are subject to regulation by various federal,
state and local governmental entities and agencies. As a baker of goods for
human consumption, the Company's operations are subject to stringent quality
and labeling standards, including the Federal Food and Drug Act. The
operations of the Company's bakeries and its delivery fleet are subject to
various federal, state and local environmental laws and workplace regulations,
including the Occupational Safety and Health Act, the Fair Labor Standards
Act, the Clean Air Act and the Clean Water Act. The Company believes that its
current legal and environmental compliance programs adequately address such
concerns and that it is in substantial compliance with such applicable laws
and regulations.
The Company has underground fuel storage tanks at various locations
throughout the United States which are subject to federal and state
regulations establishing minimum standards for such tanks and where necessary,
remediation of associated contamination. The Company is presently in the
process of testing and evaluating, and, if necessary, removing, replacing or
upgrading such tanks in order to comply with such laws. In addition, the
Company has received notices from the United States Environmental Protection
Agency, state agencies, and/or private parties seeking contribution, that it
has been identified as a "potentially responsible party" (PRP), under the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended. Because of these activities, the Company may be required to share in
the cost of cleanup with respect to a relatively small number of "Superfund"
sites. The Company's ultimate liability in connection with these sites may
depend on many factors including the volume of material contributed to the
site, the number of other PRP's and their financial viability and the
remediation methods and technology to be used. While it is difficult to
quantify the potential financial impact of actions involving environmental
matters, particularly remediation costs at waste disposal sites and future
capital expenditures for environmental control equipment, in the opinion of
the Company's management, the ultimate liability arising from such
environmental matters, taking into account established accruals for estimated
liabilities, should not be material to the overall financial position of the
Company, but could be material to results of operations or cash flows for a
particular quarter or annual period.
Subsequent Events
- -----------------
On June 12, 1998, the Company signed an agreement to acquire the My Bread Co.
("My Bread") operation in New Bedford, Massachusetts, from The Earthgrains
Company, in exchange for its Grand Junction, Colorado bakery and an additional
cash payment. My Bread has annual sales of approximately $37 million and
employs over 400 people. The acquisition is subject to regulatory approval.
On August 16, 1998, the Company acquired the assets of the Drake baking
operation in Wayne, New Jersey ("Drake's") from Culinar, Inc. Drake's
employed over 800 people, sold cake products throughout the northeastern
United States and had annual sales of approximately $115 million. The
acquisition was financed with borrowings under a new $125,000,000 short-term
credit facility from a major bank. The short-term credit facility is expected
to be replaced with a new senior debt issuance during the second quarter of
fiscal 1999.
Item 2. Properties
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Bakeries
- --------
The Company produces substantially all of its products through its
national network of 69 bakeries. All of the Company's bakeries are owned with
the exception of a bakery in San Diego, Castroville and Montebello,
California, which are leased premises. The Company's bakeries are located as
follows:
Akron, Ohio Memphis, Tennessee
Alexandria, Louisiana Miami, Florida
Anchorage, Alaska Milwaukee, Wisconsin
Billings, Montana Minonk, Illinois
Birmingham, Alabama Minot, North Dakota
Boise, Idaho Monroe, Louisiana
Boonville, Missouri Montebello, California
Buffalo, New York Natick, Massachusetts
Castroville, California Oakland, California
Central Falls, Rhode Island Ogden, Utah
Charlotte, North Carolina Orlando, Florida
Cincinnati, Ohio Peoria, Illinois
Columbus, Georgia Philadelphia, Pennsylvania
Columbus, Indiana Pomona, California
Columbus, Ohio Portland, Maine
Davenport, Iowa Portland, Oregon
Decatur, Illinois Richmond, Virginia
Denver, Colorado Roanoke, Virginia
Detroit, Michigan Rocky Mount, North Carolina
Emporia, Kansas Sacramento, California (2)
Florence, South Carolina Salt Lake City, Utah
Glendale, California San Diego, California (2)
Grand Junction, Colorado San Francisco, California (2)
Grand Rapids, Michigan San Pedro, California
Hodgkins, Illinois Schiller Park, Illinois
Indianapolis, Indiana Seattle, Washington (2)
Jacksonville, Florida Spokane, Washington
Jamaica, New York Springfield, Missouri
Kansas City, Missouri St. Louis, Missouri
Knoxville, Tennessee Tampa, Florida
Los Angeles, California (3) Tulsa, Oklahoma
Waterloo, Iowa
The Company attempts to realize operating synergies through consolidation
of redundant facilities. In January 1998, the Company acquired the assets of
the John J. Nissen Baking companies, a major New England baker with bakeries
in Portland, Maine, Central Falls, Rhode Island and Worcester, Massachusetts.
The Worcester facility has been closed and the Company has announced the
closing of the Central Falls bakery. As part of the acquisition, the Company
also acquired a bakery under construction in Biddeford, Maine which is
expected to cost approximately $60 million.
The Company also makes capital investments to update or retrofit its
facilities to produce new products on existing lines and to increase line
speeds. The Company just completed a $20 million expansion and modernization
of its Rocky Mount, North Carolina bakery to produce bread and buns for sale
in the Southeast United States and is constructing a new $27 million bread
bakery in Northwood, Ohio. The Company believes that its other facilities are
well maintained but continues to pursue opportunities to enhance operating
efficiencies through strategic capital investment.
Other Properties
- ----------------
The Company's over 1,300 distribution centers and approximately 1,500
thrift stores are located throughout the Company's distribution area.
Generally, each thrift store is between 500 and 1,600 square feet in size.
Most of the stores are located at the Company's distribution centers, with the
remainder located along the Company's distribution routes. The majority of
the Company's distribution centers and thrift stores are located in leased
premises.
Item 3. Legal Proceedings
- ------ -----------------
The Company has been named as a defendant in various claims arising out
of its normal business operations. Based upon the facts available to date,
management believes that the Company has meritorious defenses to these actions
and that their ultimate resolution will not have a material adverse effect on
the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ------ -------------------------------------------------------------
Matters
-------
The section entitled "Common Stock Information" appearing on page 1 of
the Annual Report is incorporated herein by this reference. Note 2, entitled
"Description of Business and Significant Accounting Policies", specifically
the section subtitled "Stock Split" appearing on page 25 of the Annual Report
is also incorporated herein by this reference. Note 3, entitled "Debt", to
the consolidated financial statements appearing on page 26 of the Annual
Report is also incorporated herein by this reference with regard to
limitations on cash dividends and Common Stock repurchases. The section
entitled, "Management's Discussion and Analysis of Financial Condition and
Results of Operations", specifically the subsection entitled "Capital
Resources and Liquidity" appearing on page 19 of the Annual Report is also
incorporated herein by this reference with regard to planned common stock
repurchases and dividend payments on the Common Stock. The 33,846,154
unregistered shares of the Company's Common Stock issued to Ralston on
July 22, 1995 in connection with the Company's acquisition of CBC, were issued
in reliance upon Section 4(2) of the Securities Act of 1933, as amended, as a
transaction by an issuer not involving any public offering.
Item 6. Selected Financial Data
- ------- -----------------------
The section entitled "Five-Year Summary of Financial Data", appearing on
page 17 of the Annual Report, is incorporated herein by this reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing on pages 18 to 19 of the Annual
Report is incorporated herein by this reference.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The consolidated financial statements and accompanying notes and the
Independent Auditors' Report appearing on pages 20 to 31 of the Annual Report
are incorporated herein by this reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
PART III
The information required by Part III (Item 10, 11, 12 and 13) is
incorporated herein by reference to the Company's definitive proxy statement,
involving the election of directors and ratification of independent auditors
filed on August 20, 1998.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
- -------- --------------------------------------------------------------
(a) Documents Filed as Part of this Report:
1. Financial Statements
The following financial statements and report included in the
Company's Annual Report are incorporated herein by reference:
Consolidated Balance Sheet at May 30, 1998 and May 31,
1997.
For the 52 weeks ended May 30, 1998, May 31, 1997 and
June 1, 1996:
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Consolidated Statement of Stockholders' Equity
Notes to Consolidated Financial Statements
Independent Auditors' Report dated July 15, 1998
2. Financial Statement Schedule
The following report and schedule are filed herewith as a
part hereof:
Independent Auditors' Report dated July 15, 1998
Schedule for the 52 weeks ended May 30, 1998, May 31,
1997 and June 1, 1996:
II Valuation and Qualifying Accounts
All other schedules have been omitted since the required
information is not present or not present in amounts
sufficient to require submission of the schedule, or because
the information required is included in the consolidated
financial statements or the notes thereto.
3. Exhibits
The exhibits are listed in the Exhibit Index. Copies of
certain documents have not been filed as exhibits, in
reliance upon paragraph (b)(4)(iii) of Item 601 of
Regulation S-K. Registrant agrees to furnish a copy of any
such instrument to the Securities and Exchange Commission
upon request.
(b) Reports on Form 8-K:
--------------------
No reports on Form 8-K were filed in the last quarter of the
fiscal year to which this Annual Report on Form 10-K relates.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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
Dated: August 19, 1998 By: /s/ Charles A. Sullivan
-------------------------------
Charles A. Sullivan
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the dates indicated.
Capacities
Name of Signatory In Which Signing Date
- ----------------- ---------------- ----
/s/ Charles A. Sullivan Chairman of the Board, August 19, 1998
- ----------------------- Chief Executive Officer
Charles A. Sullivan and Director (Principal
Executive Officer)
/s/ Michael J. Anderson Director August 19, 1998
- -----------------------
Michael J. Anderson
/s/ G. Kenneth Baum Director August 19, 1998
- -------------------
G. Kenneth Baum
/s/ Leo Benatar Director August 19, 1998
- ---------------
Leo Benatar
/s/ E. Garrett Bewkes, Jr. Director August 19, 1998
- --------------------------
E. Garrett Bewkes, Jr.
/s/ Philip Briggs Director August 19, 1998
- -----------------
Philip Briggs
/s/ Robert B. Calhoun, Jr. Director August 19, 1998
- --------------------------
Robert B. Calhoun, Jr.
/s/ Frank E. Horton Director August 19, 1998
- -------------------
Frank E. Horton
/s/ James R. Elsesser Director August 19, 1998
- ---------------------
James R. Elsesser
/s/ Paul E. Yarick Vice President and Treasurer August 19, 1998
- ------------------ (Principal Financial Officer)
Paul E. Yarick
/s/ John F. McKenny Vice President and Corporate August 19, 1998
- ------------------- Controller (Principal
John F. McKenny Accounting Officer)
INDEPENDENT AUDITORS' REPORT
Interstate Bakeries Corporation
We have audited the consolidated financial statements of Interstate
Bakeries Corporation and its subsidiaries as of May 30, 1998 and May 31, 1997,
and for each of the three fiscal years in the period ended May 30, 1998, and
have issued our report thereon dated July 15, 1998; such consolidated
financial statements and report are included in your 1998 Annual Report to
Stockholders and are incorporated herein by reference. Our audits also
included the consolidated financial statement schedule of Interstate Bakeries
Corporation and its subsidiaries, listed on Item 14. This consolidated
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
July 15, 1998
INTERSTATE BAKERIES CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FIFTY-TWO WEEKS ENDED MAY 30, 1998, MAY 31, 1997
AND JUNE 1, 1996
(In Thousands)
Balance at Additions Accounts Balance
beginning charged charged at end
Description of period to income off of period
- ----------- ---------- --------- -------- ---------
1998:
Reserve for
discounts
and allow-
ances on
accounts
receivable $ 7,977 $(2,663) $ - $ 5,314
Allowance for
doubtful
accounts 4,577 1,853 2,323 4,107
------- ------- ------- -------
$12,554 $ (810) $ 2,323 $ 9,421
======= ======= ======= =======
1997:
Reserve for
discounts
and allow-
ances on
accounts
receivable $ 7,414 $ 563 $ - $ 7,977
Allowance for
doubtful
accounts 3,606 2,478 1,507 4,577
------- ------- ------- -------
$11,020 $ 3,041 $ 1,507 $12,554
======= ======= ======= =======
1996:
Reserve for
discounts
and allow-
ances on
accounts
receivable $ 8,404 $ (990) $ - $ 7,414
Allowance for
doubtful
accounts 3,744 621 759 3,606
------- ------- ------- -------
$12,148(1) $ (369) $ 759 $11,020
======= ======= ======= =======
(1) Restated to include opening balance of Continental Baking Company acquired
on July 22, 1995.
EXHIBIT INDEX
-------------
Exhibit
No. Exhibit
- ------- -------
3.1 Restated Certificate of Incorporation of Interstate Bakeries
Corporation, as amended (incorporated herein by reference to
Exhibit 3.1 to the Annual Report on Form 10-K of Interstate
Bakeries Corporation filed on August 30, 1995).
3.2 Restated Bylaws of Interstate Bakeries Corporation (incorporated
herein by reference to Exhibit 3.2 to the Annual Report on
Form 10-K of Interstate Bakeries Corporation filed on August 30,
1991 (the "1991 10-K")).
4.1 Article FOURTH of Restated Certificate of Incorporation of
Interstate Bakeries Corporation (incorporated herein by reference
to Exhibit A to the Proxy Statement relating to the 1997 Annual
Meeting of Stockholders of Interstate Bakeries Corporation).
10.1 Interstate Bakeries Corporation 1991 Stock Option Plan
(incorporated herein by reference to Exhibit 10.1 to the
Registration Statement on Form S-1 of Interstate Bakeries
Corporation, File No. 33-40830 (the "Form S-1")).
10.2 Employment Agreement, dated as of March 1, 1989, by and among
Interstate Bakeries Corporation, Interstate Brands Corporation and
Charles A. Sullivan (incorporated herein by reference to
Exhibit 10.2 to the Form S-1).
10.4 Memorandum of Agreement, dated as of May 16, 1991, by and among
Interstate Bakeries Corporation, Interstate Brands Corporation and
Charles A. Sullivan (incorporated herein by reference to
Exhibit 10.4 to the Form S-1).
10.5 Restated Memorandum of Agreement dated as of July 22, 1992 by and
among Interstate Bakeries Corporation, Interstate Brands
Corporation and Charles A. Sullivan (incorporated herein by
reference to Exhibit 10.5 to the Annual Report on Form 10-K of
Interstate Bakeries Corporation filed on August 20, 1992).
10.6 Credit Agreement, dated May 31, 1995, signed by Interstate Brands
Corporation, Chemical Bank, the Lenders and Issuing Bank (as
defined therein) (incorporated by reference to Exhibit 1 to the
Form 8-K filed on June 9, 1995).
10.7 Interstate Bakeries Corporation 1996 Stock Incentive Plan
(incorporated by reference to Exhibit A to the Proxy Statement
relating to the 1996 Annual Meeting of Stockholders of Interstate
Bakeries Corporation).
11.1 Statement regarding computation of per share earnings.*
13.1 Page 1 and pages 17 to 31 of the Interstate Bakeries Corporation
annual report to security holders for the year ended May 30,
1998. (Those portions of the annual report to security holders
not listed here shall not be deemed to be filed as a part of this
Report.)*
21.1 Subsidiaries of Interstate Bakeries Corporation.*
-------------------------
* Filed herewith.