Interstate Bakeries Corporation (NYSE:IBC), the nation's largest baker and distributor of fresh branded bread and cake, yesterday reported that earnings per diluted share, before one-time charges and the net benefit from accounting changes, were $.46 for its twelve-week first quarter ended Aug. 25, 2001, up 14.6 percent over the prior year's $.41.

Net sales for the quarter increased 1.3 percent over a year ago.

The adoption of two new accounting rules relating to derivatives and the amortization of goodwill and other intangibles increased earnings by a net $.04 per share, while one-time charges in the quarter related to the closure of IBC's Detroit cake bakery and a settlement, through mediation, of its San Francisco, California, lawsuit, reduced earnings by $25,700,000, or $.31 per share. Final per-share earnings after adjustments for the quarter were $.19.

For the twelve weeks ended Aug. 25, 2001, IBC reported:

  • Net sales of $828,710,000, an increase of 1.3 percent in comparison to the prior year's $818,166,000.
  • Operating income of $25,252,000, or 3.0 percent of net sales, compared to the previous year's $50,106,000, or 6.1 percent of net sales. Before one-time charges, operating income was $50,952,000, or 6.1 percent of net sales.
  • Net income after adjustments of $9,798,000, or 1.2 percent of net sales, compared to the prior year's $26,885,000, or 3.3 percent of net sales.
  • Earnings per share of $.19 (diluted basis) after adjustments in comparison to the previous year's $.41.

Sales unit volumes were down slightly, but price increases provided modest net sales growth for the quarter.

"Much of the momentum established in the closing months of the past fiscal year continued into the current year. With few exceptions, expectations were met," IBC Chairman and Chief Executive Officer Charles A. Sullivan said. "But more hard work awaits us if we are to meet our future performance goals and further drive shareholder value."

"Sales trends are far from robust, and increasing sales volume is a priority for us," he said. "We intend to drive growth through more effective merchandising programs for both bread and cake, selected product introductions and expansion of our most popular bakery products lines."

"Though the business climate remained a challenge through the quarter, we continued to make appropriate adjustments to help reduce or control production and distribution costs," Mr. Sullivan said. "Our extended shelf life program will continue to play a significant role in cost control, with the added benefit of improved quality and availability of our products."

In other items, the Company announced an agreement with Pepperidge Farm, Inc. to manufacture and distribute certain super premium bread and roll products under the Pepperidge Farm label. Products will be introduced into the Arizona market where Pepperidge Farm bread and roll products are not currently available. Also, the Company reduced its total debt by $65,000,000, from $585,000,000 to $520,000,000, during the quarter. The Company continues to evaluate among its investment alternatives the repurchase of the Company's common stock as market conditions warrant.

In order to contribute to the immediate needs of the areas hardest hit by the recent tragic events, IBC, through the Red Cross and the Salvation Army, is donating bakery products (Wonder, Hostess and Drake's) to rescue workers and others in lower Manhattan and Washington, D.C.

Looking to the future, Mr. Sullivan said: "We are dedicated to doing whatever it takes to succeed in fiscal 2002 and beyond. We have plotted our course carefully and decisively, and the elements are in place to continue the momentum toward solid, steady growth."

Interstate Bakeries Corporation is the nation's largest wholesale baking company with 62 bread and cake bakeries located in strategic markets from coast-to-coast. The Company is headquartered in Kansas City, Missouri.

                     (000'S EXCEPT PER-SHARE DATA)

                                              Twelve Weeks Ended
                                           August 25,    August 26,
                                              2001          2000
                                           ----------    ----------
 Net sales                                 $ 828,710     $ 818,166
                                           ----------    ----------
 Cost of products sold                       387,743       384,220
 Selling, delivery and administrative
   expenses                                  367,724       358,324
 (a)Other charges                             25,700             0
 Depreciation and amortization                22,291        25,516
                                           ----------    ----------
                                             803,458       768,060
                                           ----------    ----------
 Operating income                             25,252        50,106
 Interest expense -- net                       9,749         6,532
                                           ----------    ----------
 Income before income taxes                   15,503        43,574
 Income taxes                                  5,705        16,689
                                           ----------    ----------
 Net income                                $   9,798     $  26,885
                                           ==========    ==========
 Earnings per share:
   Basic                                   $     .19     $     .41
                                           ==========    ==========
   Diluted                                 $     .19     $     .41
                                           ==========    ==========

 Average shares outstanding:
   Basic                                      50,598        65,232
                                           ==========    ==========
   Diluted                                    51,451        65,472
                                           ==========    ==========

    Earnings per diluted share before other charges and changes in
accounting were $.46 for the twelve weeks ended August 25, 2001,
compared to $.41 a year ago. The impact of implementing the new
accounting rules for derivatives reduced earnings per share by $.01
while the new accounting rules for goodwill and intangibles increased
earnings per share by $.05.
    (a) Other charges during the quarter of $25,700,000, or $.31 per
share, relate to the closure of our Detroit cake bakery and a
settlement, through mediation, of our San Francisco, California,


                                          August 25,     June 2,
                                             2001         2001
                                          ----------   ----------
  Current assets                          $  335,566    $ 336,925
  Property and equipment -- net              861,445      874,310
  Other assets                               415,854      412,261
                                          ----------   ----------
                                          $1,612,865   $1,623,496
                                          ==========   ==========
Liabilities and Stockholders' Equity:
  Current liabilities                     $  406,022   $  347,408
  Long-term debt                             481,250      555,937
  Other long-term liabilities                328,598      327,346
  Stockholders' equity                       396,995      392,805
                                          ----------   ----------
                                          $1,612,865   $1,623,496
                                          ==========   ==========