Interstate Bakeries Corporation (NYSE:IBC), the nation's largest baker and distributor of fresh branded bread and cake, today reported lower operating income and earnings per share for its 16-week third quarter ended March 10, 2001. The Company's operating income was $28,989,000, compared to the previous year's $41,336,000, while earnings per share on a diluted basis were $0.15, compared to the prior year's $0.30.

Regarding the quarterly results, IBC Chairman and Chief Executive Officer Charles A. Sullivan commented: ``We reported in December that in the absence of any positive growth in top-line sales to offset higher operating costs, our financial performance in this quarter would be similar to the prior quarter. We have moved quickly to implement action plans for driving future earnings growth amidst these challenging circumstances.''

Summarizing the Company's financial performance for the 16-week quarter ended March 10, 2001:

  • Net sales of $1,038,969,000, an increase of 0.3 percent over the prior year's $1,035,609,000.
  • Operating income of $28,989,000, or 2.8 percent of net sales, compared to last year's $41,336,000, or 4.0 percent of net sales.
  • Net income of $7,747,000, or 0.7 percent of net sales, compared to the previous year's $20,417,000, or 2.0 percent of net sales.
  • Diluted earnings per share of $0.15 compared to the prior year's $0.30.

For the first 40 weeks of the fiscal year, the Company reported:

  • Net sales of $2,676,476,000, an increase of 0.8 percent over the prior year's $2,655,682,000.
  • Operating income of $111,771,000, or 4.2 percent of net sales, compared to the prior year's $150,278,000, or 5.7 percent of net sales.
  • Net income of $46,018,000, or 1.7 percent of net sales, compared to the previous year's $81,581,000, or 3.1 percent of net sales.
  • Diluted earnings per share of $0.83 compared to the prior year's $1.18.

In reviewing costs, Mr. Sullivan noted that over 80% of the reduction in operating income for the quarter resulted from higher energy and fuel costs. Excluding the impact of energy cost increases, our gross profit as a percent of net sales was approximately 53.2% for the quarter, compared to 52.2% in the prior year. This margin improvement primarily reflects higher selling prices.

"With essentially flat top-line sales, even minor inflationary increases in costs squeeze margins," Mr. Sullivan said. "Therefore our primary focus has been, and continues to be, top-line sales growth. We have increased pricing but, due to the competitive nature of the market, this strategy has impacted volume. We are currently working to increase volume through the expansion of new bakery products, particularly in the Northeast and Northwest regions, and the design of more effective promotional programs."

Mr. Sullivan also noted the Company continues its drive toward improved longer-term profitability through improved efficiency and productivity at its 65 bakeries.

"We have invested, and will continue to invest, in projects that drive costs out of the system and enhance product quality and manufacturing efficiency. During the year, we have had a seamless transfer of production into our new Knoxville, Tennessee, bakery and should be moving production into our new Kansas City bakery by early summer. Both of these new facilities replace older, less efficient bakeries. We have also announced the closing of our Richmond, Virginia, bakery with production shifted to our recently modernized Rocky Mount, North Carolina, plant. We have also taken action toward more efficient realignment of our distribution routes, particularly in the Southeast, Midwest and New England areas. Better overall route productivity ensures higher routes averages and reduced selling expense, and is essential to improved profitability," he said.

Looking to the future, Mr. Sullivan said the fourth quarter would be no less challenging than the third.

"Our strategies are in place and being implemented to drive sales volume and earnings growth," he said. "Ingredient costs should remain reasonable in light of current commodity purchase contracts in place through the balance of the fiscal year. We intend to continue maintaining a tight discipline on operational costs. In response to the expected higher energy costs, we will continue to review pricing, and protect margins as appropriate."

Interstate Bakeries Corporation is the nation's largest wholesale baking company with 65 bread and cake bakeries located in strategic markets from coast-to-coast. The Company is headquartered in Kansas City, Missouri.

                   INTERSTATE BAKERIES CORPORATION
                   CONSOLIDATED STATEMENT OF INCOME
                     (000'S EXCEPT PER-SHARE DATA)

                     Sixteen Weeks Ended      Forty Weeks Ended
                   ----------------------  ---------------------
                    March 10,    March 4,   March 10,   March 4,
                     2001         2000       2001        2000
                   ----------  ----------  ---------- ----------
Net sales          $1,038,969  $1,035,609  $2,676,476 $2,655,682
                   ----------  ----------  ---------- ----------
Cost of products
 sold                 492,207     494,886   1,268,286  1,254,563
Selling, delivery
 and administrative
 expenses             483,470     464,534   1,211,021  1,164,653
Depreciation and
 amortization          34,303      34,853      85,398     86,188
                   ----------  ----------  ---------- ----------
                    1,009,980     994,273   2,564,705  2,505,404
                   ----------  ----------  ---------- ----------
Operating income       28,989      41,336     111,771    150,278
Interest expense
 -- net                16,246       8,669      36,083     19,748
                   ----------  ----------  ---------- ----------
Income before
 income taxes          12,743      32,667      75,688    130,530
Income taxes            4,996      12,250      29,670     48,949
                   ----------  ----------  ---------- ----------
Net income         $    7,747  $   20,417  $   46,018 $   81,581
                   ==========  ==========  ========== ==========
Earnings per
 share:
  Basic            $     0.15  $     0.30  $     0.83 $     1.19
                   ==========  ==========  ========== ==========
  Diluted          $     0.15  $     0.30  $     0.83 $     1.18
                   ==========  ==========  ========== ==========
Average shares
 outstanding:
  Basic                50,561      67,239      55,176     68,831
                   ==========  ==========  ========== ==========
  Diluted              50,708      67,382      55,369     69,129
                   ==========  ==========  ========== ==========

                 CONSOLIDATED CONDENSED BALANCE SHEET
                                (000'S)

                                      March 10,     June 3,
                                        2001         2000
Assets:                              ----------  ----------
  Current assets                     $  327,320  $  341,147
  Property and equipment -- net         879,500     886,078
  Other assets                          417,021     424,700
                                     ----------  ----------
                                     $1,623,841  $1,651,925
                                     ==========  ==========
Liabilities and Stockholders' Equity:
  Current liabilities                $  909,075  $  330,457
  Long-term debt                              0     385,000
  Other long-term liabilities           333,583     344,791
  Stockholders' equity                  381,183     591,677
                                     ----------  ----------
                                     $1,623,841  $1,651,925
                                     ==========  ==========