US wholesale baker and distributor Interstate Bakeries Corporation has announced plans to consolidate operations in its Northern California Profit Center (PC) by closing two bakeries in San Francisco.
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Interstate Bakeries expects to complete the consolidation by 22 August 2005, subject to bankruptcy court approval, it said. The consolidation is expected to affect approximately 650 workers.
“In order to ensure a long and successful future for IBC and to save as many jobs as possible the company must continue making these difficult decisions,” said Tony Alvarez II, chief executive of IBC and co-founder and co-chief executive of Alvarez & Marsal, the corporate advisory and turnaround management services firm. “I appreciate the years of dedicated service and hard work by our employees and deeply regret the impact this news may have on them. We will make every reasonable effort to make this transition as smooth as possible.”
The company’s preliminary estimate of charges to be incurred in connection with the Northern California PC consolidation is approximately $13.5m, including approximately $6.0m of severance charges, approximately $2.5m of asset impairment charges and approximately $5.0m in other charges. IBC further estimates that approximately $11m of such costs will result in future cash expenditures.
In addition, the company intends to spend approximately $3m in capital expenditures and accrued expenses to effect the consolidation. In addition to the asset impairment charges discussed above, IBC also expects to recognize charges to intangible assets related to trademarks and trade names that will be impaired as a result of the consolidation of operations announced today. IBC is not able to provide an estimate of these changes currently, it said.
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By GlobalDataThe two bakeries to close as a result of this announcement are the 77-year old Wonder/Hostess bakery and the 49-year old Parisian San Francisco bakery. Distribution of IBC’s branded products to supermarkets in the Northern California PC will be unaffected by the closure.
Interstate Bakeries Corporation filed for bankruptcy protection on September 22, 2004, citing liquidity issues resulting from declining sales, a high fixed-cost structure, excess industry capacity, rising employee healthcare and pension costs and higher costs for ingredients and energy. The company continues to operate its business in the ordinary course as a debtor- in-possession. Recently, the company announced the closing of its bakeries in Miami, Florida, Charlotte, North Carolina, and New Bedford, Massachusetts and the consolidation of production, routes, depots and thrift stores in its Florida, Mid-Atlantic and Northeast PCs.
