UNITEDTable STATES SECURITIESof AND EXCHANGE COMMISSION Contents

~~Washington,~~UNITED ~~D.C.~~STATES SECURITIES ~~20549~~AND EXCHANGE COMMISSION

~~FORM~~Washington, ~~10-Q~~D.C. 20549

~~Quarterly~~FORM ~~Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934~~10-Q

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

~~þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15~~(d)Mark ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~One)

~~For~~þ ~~the~~QUARTERLY ~~quarterly~~REPORT ~~period~~PURSUANT ~~ended~~TO ~~November 17,~~SECTION ~~2007~~ 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ORFor the quarterly period ended November 15, 2008

~~o TRANSITION REPORT PURSUANT TO SECTION 13~~ OR ~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For the~~o ~~transition~~TRANSITION ~~period~~REPORT ~~from to~~ PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For ~~File~~the ~~Number~~transition ~~1-11165~~period from to

~~INTERSTATE~~Commission ~~BAKERIES~~File ~~CORPORATION~~ Number 1-11165

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

Delaware (State or other jurisdiction of incorporation or organization)		43-1470322 (I.R.S. Employer Identification No.)
12 East Armour Boulevard, Kansas City, Missouri		64111
(Address of principal executive offices)		(Zip Code)

(Exact name of registrant as specified in its charter)

(816) 502-4000 (Registrant’s telephone number, including area code)


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)

~~Indicate by check mark whether the registrant~~ (1816) ~~has filed all reports required to be filed by~~502-4000 ~~Section 13 or 15~~(d)Registrant’s oftelephone ~~the~~number, ~~Securities~~including ~~Exchange~~area ~~Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports~~code) ~~and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o~~

Indicate by check mark whether the registrant is(1) has afiled ~~large~~all ~~accelerated~~reports ~~filer,~~required anto ~~accelerated~~be ~~filer~~filed orby aSection 13 ~~non-accelerated~~or ~~filer.~~15(d) ~~See~~of ~~definition~~the ofSecurities ~~“accelerated~~Exchange ~~filer~~Act ~~and~~of ~~large~~1934 ~~accelerated~~during ~~filer”~~the inpreceding ~~Rule~~12 months (or for ~~12b-2~~such ofshorter period that the ~~Exchange~~registrant ~~Act~~was ~~(check~~required ~~one~~to file such reports): and (2) has been subject ~~Large~~to ~~accelerated~~such ~~filer~~filing ~~o Accelerated~~requirements ~~filer~~for the past 90 days. Yes þ ~~Non-accelerated~~ ~~filer~~No o

Indicate by check mark whether the registrant is a ~~shell~~large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. ~~(as~~See ~~defined~~the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act~~). Yes~~ o(check ~~No þ~~one):

~~There~~Large ~~were~~accelerated ~~45,240,384~~filer ~~shares~~o ofAccelerated ~~common~~filer ~~stock,~~o ~~$0.01~~Non-accelerated ~~par~~filer ~~value~~o ~~per~~Smaller ~~share,~~reporting ~~outstanding~~company onþ ~~December 10,~~(Do ~~2007.~~not ~~Giving~~check ~~effect~~if toa ~~our~~smaller ~~senior~~reporting ~~subordinated convertible notes and common stock equivalents, there were 55,138,825 shares of common stock outstanding as of December 10, 2007.~~ company)

~~INTERSTATE~~Indicate ~~BAKERIES~~by ~~CORPORATION FORM~~check 10mark whether the registrant is a shell company (as defined in Rule 12b-Q2 of the ~~QUARTER~~Exchange ~~ENDED~~Act). ~~NOVEMBER~~Yes ~~17,~~o ~~2007~~No þ

	Description	Page
PART I - FINANCIAL INFORMATION (UNAUDITED)		3
ITEM 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statement of Stockholders’ Deficit	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Forward-Looking Statements		43
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	47
ITEM 4.	Controls and Procedures	47
PART II - OTHER INFORMATION		48
ITEM 1.	Legal Proceedings	48
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
ITEM 6.	Exhibits	50
Signatures		57

There were 45,202,826 shares of common stock, $0.01 par value per share, outstanding on December 15, 2008. Giving effect to our senior subordinated convertible notes and common stock equivalents, there were 55,101,267 shares of common stock outstanding as of December 15, 2008.

2INTERSTATE BAKERIES CORPORATION FORM 10-Q QUARTER ENDED November 15, 2008

PART I. FINANCIAL INFORMATION


Description	Page
PART I — FINANCIAL INFORMATION (UNAUDITED)		3

ITEM 1. Financial Statements		3

Condensed Consolidated Balance Sheets		3

Condensed Consolidated Statements of Operations		4

Condensed Consolidated Statements of Cash Flows		5

Condensed Consolidated Statement of Stockholders’ Deficit		6

Notes to Condensed Consolidated Financial Statements		7

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30

Forward-Looking Statements		39

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		42

ITEM 4. Controls and Procedures		42

PART II — OTHER INFORMATION		44

ITEM 1. Legal Proceedings		44

ITEM 1A. Risk Factors		45

ITEM 6. Exhibits		46

Signatures		47
EX-31.1
EX-31.2
EX-32.1
EX-32.2

~~Item 1. Financial Statements~~2

INTERSTATETable BAKERIESof CORPORATIONContents

~~(DEBTOR-IN-POSSESSION)~~PART I. FINANCIAL INFORMATION

~~CONDENSED~~Item 1. ~~CONSOLIDATED~~Financial ~~BALANCE SHEETS~~Statements

INTERSTATE BAKERIES CORPORATION (~~UNAUDITED~~DEBTOR-IN-POSSESSION)

~~(dollars~~CONDENSED inCONSOLIDATED ~~thousands,~~BALANCE ~~except share data)~~SHEETS

	November 17,			June 2,
	2007			2007
ASSETS
Current assets
Cash	$	58,440		$	67,212
Restricted cash		19,156			15,085
Accounts receivable, less allowance for doubtful accounts of $2,237 and $2,315, respectively		134,880			152,175
Inventories		53,813			65,682
Assets held for sale		567			2,032
Other current assets		47,186			49,649
Total current assets		314,042			351,835
Property and equipment, net		511,453			541,725
Intangible assets		159,266			160,239
Other assets		30,480			27,593
Total assets	$	1,015,241		$	1,081,392
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities not subject to compromise
Current liabilities
Long-term debt	$	453,442		$	451,515
Accounts payable		116,162			129,137
Accrued expenses		220,334			217,373
Total current liabilities		789,938			798,025
Other liabilities		238,570			236,766
Deferred income taxes		72,229			74,789
Total liabilities not subject to compromise		1,100,737			1,109,580
Liabilities subject to compromise		294,609			290,553
Stockholders’ deficit
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued		—			—
Common stock, $0.01 par value, 120,000,000 shares authorized, 81,579,000 shares issued, 45,240,000 and 45,249,000 shares outstanding, respectively		816			816
Additional paid-in capital		584,894			584,503
Accumulated deficit		(314,362	)		(255,559	)
Treasury stock, 36,339,000 and 36,330,000 shares at cost, respectively		(678,737	)		(678,721	)
Accumulated other comprehensive income		27,284			30,220
Total stockholders’ deficit		(380,105	)		(318,741	)
Total liabilities and stockholders’ deficit	$	1,015,241		$	1,081,392

(UNAUDITED)

~~See~~(dollars ~~accompanying~~in ~~notes~~thousands, toexcept ~~condensed~~share ~~consolidated financial statements.~~ data)


	November 15,			May 31,
	2008			2008
ASSETS

Current assets
Cash	$	24,664		$	25,071
Restricted cash		21,117			21,052
Accounts receivable, less allowance for doubtful accounts of $2,278 and $2,050, respectively		134,607			136,627
Inventories		60,140			61,837
Assets held for sale		13,303			17,562
Other current assets		48,480			43,995


Total current assets		302,311			306,144

Property and equipment, net		444,614			464,455
Intangible assets		158,258			158,285
Other assets		29,919			29,473


Total assets	$	935,102		$	958,357


LIABILITIES AND STOCKHOLDERS’ DEFICIT

Liabilities not subject to compromise
Current liabilities
Pre-petition debt	$	2,405		$	2,759
Post-petition debt		113,191			63,358
Accounts payable		106,032			108,288
Accrued expenses		172,276			205,411


Total current liabilities		393,904			379,816

Other liabilities		186,448			219,288
Deferred income taxes		68,295			69,475


Total liabilities not subject to compromise		648,647			668,579


Liabilities subject to compromise		829,731			751,492


Stockholders’ deficit
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued		—			—
Common stock, $0.01 par value, 120,000,000 shares authorized, 81,579,000 shares issued, 45,202,000 shares outstanding		816			816
Additional paid-in capital		584,485			584,485
Accumulated deficit		(481,324	)		(403,038	)
Treasury stock, 36,377,000 shares at cost		(678,740	)		(678,740	)
Accumulated other comprehensive income		31,487			34,763


Total stockholders’ deficit		(543,276	)		(461,714	)


Total liabilities and stockholders’ deficit	$	935,102		$	958,357

~~INTERSTATE~~See ~~BAKERIES~~accompanying ~~CORPORATION~~notes to condensed consolidated financial statements.

~~(DEBTOR-IN-POSSESSION)~~3

CONDENSEDTable CONSOLIDATEDof STATEMENTS OF OPERATIONSContents

INTERSTATE BAKERIES CORPORATION (~~UNAUDITED~~DEBTOR-IN-POSSESSION)

~~(dollars~~CONDENSED inCONSOLIDATED ~~thousands,~~STATEMENTS ~~except~~OF ~~per share data)~~OPERATIONS

	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 17,			November 18,			November 17,			November 18,
	2007			2006			2007			2006
Net sales	$	645,116		$	671,913		$	1,334,932		$	1,356,158
Cost of products sold (exclusive of items shown below)		328,500			347,521			671,731			699,693
Selling, delivery and administrative expenses		310,201			318,704			631,244			641,372
Restructuring (credits) charges		7,929			(4,193	)		7,881			(3,664	)
Depreciation and amortization		15,205			16,116			30,853			32,533
Loss on sale or abandonment of assets		378			516			391			734
Property and equipment impairment		(351	)		—			9,842			—
		661,862			678,664			1,351,942			1,370,668
Operating loss		(16,746	)		(6,751	)		(17,010	)		(14,510	)
Other (income) expense
Interest expense (excluding unrecorded contractual interest expense of $1,367, $1,367, $2,750, and $2,750, respectively)		11,263			11,368			22,283			24,158
Reorganization charges, net		11,707			10,052			18,905			16,707
Other (income) expense		128			(1,045	)		74			(1,076	)
		23,098			20,375			41,262			39,789
Loss before income taxes		(39,844	)		(27,126	)		(58,272	)		(54,299	)
Provision (benefit) for income taxes		(683	)		(841	)		(3,118	)		(1,683	)
Net loss	$	(39,161	)	$	(26,285	)	$	(55,154	)	$	(52,616	)
Loss per share
Basic	$	(0.87	)	$	(0.58	)	$	(1.22	)	$	(1.16	)
Diluted	$	(0.87	)	$	(0.58	)	$	(1.22	)	$	(1.16	)

(UNAUDITED)

~~See~~(dollars ~~accompanying~~in ~~notes~~thousands, toexcept ~~condensed~~per ~~consolidated~~share ~~financial statements.~~ data)


	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 15,			November 17,			November 15,			November 17,
	2008			2007			2008			2007
Net revenues	$	643,931		$	645,116		$	1,302,640		$	1,334,932

Cost of products sold (exclusive of items shown below)		334,626			328,500			690,689			671,731
Selling, delivery and administrative expenses		292,685			310,201			603,616			631,244
Restructuring charges (credits)		(1,778	)		7,929			(6,179	)		7,881
Depreciation and amortization		13,650			15,205			27,325			30,853
Loss on sale or abandonment of assets		892			378			1,194			391
Property and equipment impairment		—			(351	)		—			9,842


		640,075			661,862			1,316,645			1,351,942

Operating profit (loss)		3,856			(16,746	)		(14,005	)		(17,010	)


Other (income) expense
Interest expense (excluding unrecorded contractual interest expense of $1,367, $1,367, $2,750, and $2,750, respectively)		14,444			11,263			27,902			22,283
Reorganization charges, net		34,083			11,707			40,109			18,905
Other (income) expense		109			128			62			74


		48,636			23,098			68,073			41,262


Income (loss) before income taxes		(44,780	)		(39,844	)		(82,078	)		(58,272	)
Provision (benefit) for income taxes		(3,360	)		(683	)		(3,792	)		(3,118	)


Net income (loss)	$	(41,420	)	$	(39,161	)	$	(78,286	)	$	(55,154	)


Net income (loss) per share

Basic and diluted	$	(0.92	)	$	(0.87	)	$	(1.73	)	$	(1.22	)

~~INTERSTATE~~See ~~BAKERIES~~accompanying ~~CORPORATION~~notes to condensed consolidated financial statements.

~~(DEBTOR-IN-POSSESSION)~~4

CONDENSEDTable CONSOLIDATEDof STATEMENTS OF CASH FLOWSContents

INTERSTATE BAKERIES CORPORATION (~~UNAUDITED~~DEBTOR-IN-POSSESSION)

~~(dollars~~CONDENSED inCONSOLIDATED ~~thousands)~~STATEMENTS OF CASH FLOWS

	Twenty-Four Weeks Ended
	November 17,			November 18,
	2007			2006
Operating activities
Net loss	$	(55,154	)	$	(52,616	)
Depreciation and amortization		30,853			32,533
Provision (benefit) for deferred income taxes		(1,725	)		600
Reorganization charges, net		18,905			16,707
Cash reorganization items		(14,519	)		(14,700	)
Non-cash bankruptcy-related charges (credits)		1,964			234
Non-cash interest expense — deferred debt fees		1,023			661
Non-cash restricted stock and deferred share compensation expense		375			449
(Gain) loss on sale, write-down or abandonment of assets		9,559			(5,375	)
Change in operating assets and liabilities:
Accounts receivable		17,295			2,477
Inventories		11,869			(1,540	)
Other current assets		(94	)		(2,116	)
Accounts payable and accrued expenses		(14,351	)		(6,992	)
Long-term portion of self insurance reserves		(292	)		(488	)
Other		(100	)		527
Net cash from (used in) operating activities		5,608			(29,639	)
Investing activities
Purchases of property and equipment		(10,155	)		(11,620	)
Proceeds from sale of assets		3,771			13,158
Restricted cash deposit		(3,862	)		(11,354	)
Restricted cash release		—			89,222
Acquisition and development of software assets		(494	)		(758	)
Other		33			217
Net cash from (used in) investing activities		(10,707	)		78,865
Financing activities
Reduction of long-term debt		(494	)		(45,792	)
Increase in revolving credit facility		2,421			—
Debt fees		(5,600	)		—
Net cash used in financing activities		(3,673	)		(45,792	)
Net (decrease) increase in cash		(8,772	)		3,434
Cash at the beginning of period		67,212			78,178
Cash at the end of period	$	58,440		$	81,612
Cash payments (received)
Interest	$	19,629		$	20,747
Income taxes		116			(530	)
Non-cash investing and financing activities
Long-term debt reduction from lease rejections		—			359
Asset disposals from lease rejections		—			271
Convertible note conversion to equity		—			1
Interest income earned on restricted cash deposit		209			614

(UNAUDITED)

~~See~~(dollars ~~accompanying~~in ~~notes to condensed consolidated financial statements.~~ thousands)


	Twenty-Four Weeks Ended
	November 15,			November 17,
	2008			2007
Operating activities
Net income (loss)	$	(78,286	)	$	(55,154	)
Depreciation and amortization		27,325			30,853
Provision (benefit) for deferred income taxes		(140	)		(1,725	)
Reorganization charges, net		40,109			18,905
Cash reorganization items		(16,646	)		(14,519	)
Non-cash bankruptcy-related charges		87			1,964
Non-cash interest expense — deferred debt fees		9,228			1,023
Non-cash restricted stock compensation expense		—			375
(Gain) loss on sale, write-down or abandonment of assets		(5,955	)		9,559
Change in operating assets and liabilities
Accounts receivable		2,023			17,295
Inventories		1,697			11,869
Other current assets		(5,527	)		(94	)
Accounts payable and accrued expenses		(7,575	)		(14,351	)
Long-term portion of self insurance reserves		1,164			(292	)
Other		(13,080	)		(100	)


Net cash provided by (used in) operating activities		(45,576	)		5,608


Investing activities
Purchases of property and equipment		(6,709	)		(10,155	)
Proceeds from sale of assets		11,599			3,771
Restricted cash deposit		—			(3,862	)
Acquisition and development of software assets		—			(494	)
Other		—			33


Net cash provided by (used in) investing activities		4,890			(10,707	)


Financing activities
Reduction of long-term debt		(354	)		(494	)
Increase in pre-petition debt		1,239			2,421
Reduction of post-petition debt		(11,485	)		—
Increase in post-petition debt		61,318			—
Debt and other commitment fees		(10,439	)		(5,600	)


Net cash provided by (used in) financing activities		40,279			(3,673	)


Net increase (decrease) in cash		(407	)		(8,772	)

Cash at beginning of period		25,071			67,212


Cash at end of period	$	24,664		$	58,440


Cash payments (received)
Interest	$	19,942		$	19,629
Income taxes		228			116

Non-cash investing and financing activities
Interest income earned on restricted cash deposits		65			209

~~INTERSTATE~~See ~~BAKERIES~~accompanying ~~CORPORATION~~notes to condensed consolidated financial statements.

~~(DEBTOR-IN-POSSESSION)~~5

CONDENSEDTable CONSOLIDATEDof STATEMENT OF STOCKHOLDERS’ DEFICITContents

INTERSTATE BAKERIES CORPORATION (~~UNAUDITED~~DEBTOR-IN-POSSESSION)

~~(dollars~~CONDENSED ~~and~~CONSOLIDATED ~~shares~~STATEMENT inOF ~~thousands)~~STOCKHOLDERS’ DEFICIT

	Common																Accumulated
	Stock Issued				Additional						Treasury Stock						Other			Total
	Number		Par		Paid-in			Accumulated			Number of						Comprehensive			Stockholders’
	of Shares		Value		Capital			Deficit			Shares			Cost			Income			Deficit
Balance June 2, 2007		81,579	$	816	$	584,503		$	(255,559	)		(36,330	)	$	(678,721	)	$	30,220		$	(318,741	)
Comprehensive loss		—		—		—			(55,154	)		—			—			(2,936	)		(58,090	)
Cumulative effect of change in accounting for uncertainty in income taxes pursuant to FIN No. 48		—		—		—			(3,649	)		—			—			—			(3,649	)
Restricted share compensation expense		—		—		471			—			—			—			—			471
Restricted share surrenders		—		—		(80	)		—			(9	)		(16	)		—			(96	)
Balance November 17, 2007		81,579	$	816	$	584,894		$	(314,362	)		(36,339	)	$	(678,737	)	$	27,284		$	(380,105	)

(UNAUDITED)

~~See~~(dollars ~~accompanying~~and ~~notes~~shares toin ~~condensed consolidated financial statements.~~ thousands)


	Common															Accumulated
	Stock Issued				Additional					Treasury Stock						Other			Total
	*Number*		Par		Paid-in		Accumulated			*Number of*						Comprehensive			Stockholders’
	*of Shares*		Value		Capital		Deficit			*Shares*			Cost			Income			Deficit
Balance May 31, 2008		81,579	$	816	$	584,485	$	(403,038	)		(36,377	)	$	(678,740	)	$	34,763		$	(461,714	)
Comprehensive loss		—		—		—		(78,286	)		—			—			(3,276	)		(81,562	)


Balance November 15, 2008		81,579	$	816	$	584,485	$	(481,324	)		(36,377	)	$	(678,740	)	$	31,487		$	(543,276	)

~~INTERSTATE~~See ~~BAKERIES~~accompanying ~~CORPORATION~~notes to condensed consolidated financial statements.

~~(DEBTOR-IN-POSSESSION)~~6

NOTESTable TOof CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContents

INTERSTATE BAKERIES CORPORATION (~~UNAUDITED~~DEBTOR-IN-POSSESSION)

1.NOTES ~~Voluntary~~TO ~~Chapter 11~~CONDENSED ~~Filing~~ CONSOLIDATED FINANCIAL STATEMENTS

On September 22, 2004, or the Petition Date, we and each of our wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, or the Bankruptcy Code, in the United States Bankruptcy Court for the Western District of Missouri, or the Bankruptcy Court (~~Case Nos. 04-45814, 04-45816, 04-45817, 04-45818, 04-45819,04-45820, 04-45821 and 04-45822~~UNAUDITED). On September 24, 2004, the official committee of unsecured creditors was appointed in our Chapter 11 cases. Subsequently, on November 29, 2004, the official committee of equity security holders was appointed in our Chapter 11 cases. Mrs. Cubbison’s Foods, Inc., or Mrs. Cubbison’s, a subsidiary of which we are an eighty percent owner, was not originally included in the Chapter 11 filing. However, on January 14, 2006, Mrs. Cubbison’s filed a voluntary petition for relief under the Bankruptcy Code in the Bankruptcy Court (Case No. 06-40111). The minority interest in Mrs. Cubbison’s is reflected in other liabilities and the minority interest impact on the statement of operations is insignificant for all periods presented. We are continuing to operate our business as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. In general, as a debtor-in-possession, we are authorized under the Bankruptcy Code to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court.

On September 23, 2004, we entered into a debtor-in possession Revolving Credit Agreement with JPMorgan Chase Bank, or JPMCB, and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party thereto, together with JPMCB, the Lenders, J1.P. ~~Morgan~~Voluntary Securities Inc., as lead arranger and book runner, and JPMCB, as administrative and collateral agent for the Lenders. The Revolving Credit Agreement received interim approval by the Bankruptcy Court on SeptemberChapter ~~23,~~11 ~~2004 and final approval on October 22,~~Filing 2004. The Revolving Credit Agreement provides for a $200.0 million commitment, or the Commitment, of debtor-in-possession financing to fund our post-petition operating expenses, supplier and employee obligations. We entered into the first amendment to the Revolving Credit Agreement on November 1, 2004, the second amendment to the Revolving Credit Agreement on January 20, 2005, the third amendment to the Revolving Credit Agreement on May 26, 2005, the fourth amendment to the Revolving Credit Agreement on November 30, 2005, the fifth amendment to the Revolving Credit Agreement on December 27, 2005, the sixth amendment to the Revolving Credit Agreement on March 29, 2006, the seventh amendment to the Revolving Credit Agreement on June 28, 2006, the eighth amendment to the Revolving Credit Agreement on August 25, 2006, the ninth amendment to the Revolving Credit Agreement on February 16, 2007, which amended and restated the Revolving Credit Agreement, the first amendment to the Amended and Restated Revolving Credit Agreement on October 1, 2007, the second amendment to the Amended and Restated Revolving Credit Agreement on November 29, 2007, and the third amendment to the Amended and Restated Revolving Credit Agreement on December 19, 2007 to reflect certain modifications (the Revolving Credit Agreement together with all amendments, the DIP Facility). See Note 8. Debt to these condensed consolidated financial statements for further discussion regarding the DIP Facility.

InOn ~~conjunction~~September 22, ~~with~~2004, or the ~~commencement~~Petition Date, we and each of our wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, or the Bankruptcy Code, in the United States Bankruptcy Court for the Western District of Missouri, or the Bankruptcy Court (Case Nos. 04-45814, 04-45816, 04-45817, 04-45818, 04-45819,04-45820, 04-45821 and 04-45822). On September 24, 2004, the official committee of unsecured creditors was appointed in our Chapter 11 ~~process~~cases. On November 29, 2004, the official committee of equity security holders was appointed in our Chapter 11 cases. On October 1, 2008, the United States trustee disbanded the official committee of equity security holders. On January 14, 2006, Mrs. Cubbison’s Foods, Inc., or Mrs. Cubbison’s, a subsidiary of which we ~~sought~~are ~~and~~an ~~obtained~~eighty ~~several~~percent owner, filed a voluntary ~~orders~~petition ~~from~~for relief under the Bankruptcy Code in the Bankruptcy Court ~~which~~(Case ~~were~~No. 06-40111). ~~intended~~The minority tointerest ~~enable~~in usMrs. Cubbison’s is reflected in other liabilities and the minority interest impact on the statement of operations is insignificant for all periods presented. We are continuing to operate our business as a debtor-in-possession under the ~~normal~~jurisdiction ~~course~~of the Bankruptcy Court and in accordance with the applicable provisions of ~~business~~the ~~during~~Bankruptcy Code and the ~~Chapter 11~~orders ~~process~~of the Bankruptcy Court. ~~The~~In ~~most~~general, ~~significant~~as a debtor-in-possession, we are authorized under the Bankruptcy Code to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of ~~these~~business ~~orders:~~without the prior approval of the Bankruptcy Court.

•On ~~authorize~~September 23, us2004, towe ~~pay~~entered ~~pre~~into a debtor-~~petition~~in possession Revolving Credit Agreement (as amended, the DIP Facility) with JPMorgan Chase Bank, or JPMCB, and ~~post-petition~~each ~~employee~~of ~~wages~~the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party thereto, together with JPMCB, the Lenders, J.P. Morgan Securities Inc., as lead arranger and ~~salaries~~book runner, and ~~related~~JPMCB, ~~benefits~~as ~~during~~administrative ~~our~~and ~~restructuring~~collateral ~~under~~agent ~~Chapter~~for ~~11;~~the •Lenders. ~~authorize~~The usRevolving Credit toAgreement ~~pay~~received ~~trust~~interim ~~fund~~approval ~~taxes~~by inthe Bankruptcy Court on September 23, 2004 and final approval on October 22, 2004. We most recently amended the ~~ordinary~~DIP ~~course~~Facility ofon ~~business~~September 12, ~~including~~2008. ~~pre~~The Revolving Credit Agreement currently provides for a $309.0 million commitment, or the Commitment, of debtor-in-possession financing to fund our post-petition ~~amounts;~~operating expenses, supplier and employee •obligations. ~~authorize~~The Commitment provides for additional funding of $16.0 million based on the occurrence ~~continued~~of ~~use~~certain events. The maturity date of ~~our~~the ~~cash~~DIP ~~management~~Facility ~~systems~~has been extended to February 9, 2009. See Note 8. Debt to these consolidated financial statements for further discussion regarding the DIP Facility.

7In conjunction with the commencement of the Chapter 11 process, we sought and obtained several orders from the Bankruptcy Court that were intended to enable us to operate in the normal course of business during the Chapter 11 process. The most significant of these orders:

~~Pursuant~~• toauthorize ~~the~~us ~~Bankruptcy~~to ~~Code,~~pay ~~our~~ pre-petition ~~obligations,~~and ~~including~~post-petition ~~obligations~~employee ~~under~~wages ~~debt instruments,~~and ~~generally~~salaries ~~may~~and ~~not~~related ~~been~~benefits ~~forced~~during ~~against~~our ~~us.~~restructuring Inunder ~~addition,~~Chapter ~~any~~11; ~~actions~~• authorize us to ~~collect~~ pay trust fund taxes in the ordinary course of business, including pre-petition ~~indebtedness~~amounts; ~~are~~and ~~automatically~~• ~~stayed~~authorize ~~unless~~ the ~~stay~~continued isuse ~~lifted~~of byour ~~the~~cash ~~Bankruptcy Court~~management systems.

AsPursuant ato ~~debtor-in-possession, we have~~ the ~~right, subject to~~ Bankruptcy ~~Court approval and certain other limitations~~Code, toour ~~assume~~pre-petition ~~or reject executory contracts and unexpired leases. In this context~~obligations, ~~“assume”~~ ~~means~~including ~~that we agree to perform our~~ obligations ~~and cure all existing defaults~~ under ~~the~~debt ~~contract or lease~~instruments, ~~and~~generally ~~“reject”~~may ~~means~~not ~~that~~be weenforced ~~are~~against ~~relieved~~us. ~~from~~In ~~our~~addition, ~~obligations~~any toactions ~~perform further under the contract or lease but are subject~~ to ~~a claim for damages for the breach thereof. Any~~collect ~~damages resulting from rejection of executory contracts and unexpired leases will be treated as general unsecured claims in the Chapter 11 process unless such claims had been secured on a~~ pre-petition ~~basis.~~indebtedness Asare ofautomatically ~~December 10,~~stayed ~~2007,~~unless ~~we have rejected over 500 unexpired leases and have accrued charges for our estimated liability related thereto in~~ the ~~applicable~~stay ~~periods.~~is Welifted ~~are~~by in the ~~process of reviewing our executory contracts and remaining unexpired leases to determine which,~~Bankruptcy ~~if any, we will reject~~Court. ~~For these executory contracts and remaining unexpired leases, we cannot~~ ~~presently determine or reasonably estimate the ultimate liability that may result from rejecting these contracts or leases, and no provisions have yet been made for these items.~~

~~Since~~As ~~the~~a ~~Petition Date~~debtor-in-possession, we have ~~been~~the ~~actively~~right, ~~engaged~~subject into ~~restructuring~~Bankruptcy ~~our~~Court ~~operations.~~approval Asand certain ~~previously~~other ~~disclosed~~limitations, weto ~~(i) restructured~~assume ~~our~~or 10reject ~~profit~~executory ~~centers~~contracts ~~(PCs),~~and ~~which~~unexpired ~~are~~leases. ~~now~~In 8this ~~business~~context, ~~units;~~“assume” ~~(ii) rationalized~~means ~~our~~that ~~delivery~~we ~~route~~agree ~~network;~~to ~~(iii) reduced~~perform our ~~workforce;~~obligations ~~(iv) disposed of certain non-core assets;~~ and ~~(v) commenced~~cure ~~negotiations~~all ofexisting ~~long-term~~defaults ~~extensions~~under ~~with respect to~~the ~~most~~contract ofor ~~our~~lease, ~~collective~~and ~~bargaining~~“reject” ~~agreements~~means ~~(CBAs)~~that ~~with~~we ~~union-represented~~are ~~employees.~~relieved Wefrom ~~also initiated~~our aobligations ~~marketing~~to ~~program~~perform ~~designed~~further under tothe ~~offset~~contract ~~revenue~~or ~~declines~~lease bybut ~~developing~~are ~~protocols~~subject to ~~better anticipate and meet changing consumer demand through~~ a ~~consistent~~claim ~~flow~~for ofdamages ~~new~~for ~~products.~~the

~~In February 2007, we hired a new Chief Executive Officer, Craig D. Jung, and began the next stage~~7 of restructuring activities, which initially was focused on the development of a business plan to use as a basis for a plan of reorganization. In developing such a business plan, Mr. Jung established four operating priorities for the Company: (i) profitably grow revenues; (ii) improve productivity; (iii) lower our cost structure; and (iv) create a performance culture. In order to implement these four priorities, we have determined to undertake the following initiatives, without limitation: (i) implement a distribution system with different delivery options for our customers based on customer size, growth potential and service needs to lower our cost structure and profitably grow the top line, (ii) implement a lean manufacturing program to drive productivity, (iii) improve brand management and innovation, including increased investment in marketing our brands, and (iv) redefine our organization to remove unnecessary layers of management and implement a matrix structure to improve communications, leadership and accountability.

OnTable June 28, 2007, we submitted our business plan to our various constituents in the bankruptcy, including representatives of our lender syndicates and official committees of creditors and equity security holders. In order to secure rational financing required to implement this business plan; however, we believe additional concessions from our unionized employees are required. In June of 2007, we initiated talks with representatives of the two labor organizations, the Bakery Confectionery, Tobacco Workers & Grain Millers International Union (BCTGM) and International Brotherhood of Teamsters (IBT), representing approximately 90% of our unionized employees to achieve further concessions, including greater flexibility in the method and manner by which we distribute our products to our customers and cost reductions related to health and welfare programs. Contents

Nobreach ~~agreement~~thereof. ~~with~~Any damages resulting from rejection of executory contracts and unexpired leases will be treated as general unsecured claims in the ~~IBT~~Chapter 11 ~~has~~process unless such claims had been secured ~~reached~~on a pre-petition basis. As of December 15, ~~although~~2008, we ~~remain~~have ~~open~~rejected toover ~~constructive~~550 ~~discussions~~unexpired ~~with~~leases ~~the~~and ~~IBT. We~~ have ~~reached~~accrued ~~agreement~~charges ~~with~~for ~~the~~our ~~BCTGM,~~estimated ~~which~~liability ~~has~~related ~~been~~thereto ~~ratified~~in bythe ~~approximately~~applicable ~~98%~~periods. ofFor ~~its~~the ~~local~~executory ~~bargaining~~contracts ~~units.~~and Weunexpired ~~have~~leases ~~also~~that ~~reached~~we ~~agreements~~rejected ~~with~~pursuant to the ~~majority~~terms of our plan of reorganization, we cannot presently determine or reasonably estimate the ~~other~~ultimate ~~unions~~liability ~~representing~~that ~~our~~resulted ~~employees~~from these rejections, ~~which~~and ~~have~~no ~~been~~provisions ~~ratified~~have ~~by approximately~~yet ~~12%~~been ofmade ~~their~~for ~~local~~these ~~bargaining units~~items.

InOn ~~early October~~December ~~2007~~5, we2008, ~~embarked~~the onUnited States Bankruptcy Court for the ~~process~~Western District of ~~formulating~~Missouri a(the ~~rational~~“ Bankruptcy ~~strategy~~Court ~~for~~“) ~~maximizing value~~entered an order confirming the Amended Joint Plan of Reorganization of the Company ~~bankruptcy~~and ~~estates.~~its WeAffiliated ~~continue~~Debtors toand ~~face~~Debtors-in-Possession ~~substantial~~dated ~~uncertainty~~October 31, ~~with~~2008 ~~respect~~(as toamended, the “ Plan “). The exit financings that form the basis for the Plan are reflected in certain debt ~~outcome~~and ofequity ~~our~~commitments ~~efforts~~including: to(i) that ~~maximize~~certain ~~value~~equity ofcommitment ~~the~~letter, ~~bankruptcy~~as ~~estates~~amended, entered into on September 12, 2008, between the Company and ~~there~~IBC ~~can~~Investors beI, noLLC ~~assurance~~(“Investors”) pursuant to aswhich Investors agrees to ~~whether~~provide we$130 million ~~will~~of benew ~~able~~capital to ~~successfully~~the ~~implement~~reorganized ~~any~~IBC; ~~such~~(ii) that certain ~~strategy~~commitment letter, ~~which~~as ~~may~~amended, ~~include~~entered ainto ~~sale of~~on September 12, 2008, among the Company, General Electric Capital Corporation (“GECC”) and~~/or~~ ~~its~~GE ~~assets~~Capital Markets, inInc. ~~whole~~(“GECM;” orand intogether with ~~part~~GECC, “GE”) pursuant to which GE commits, on the terms and conditions ~~acceptable~~specified therein, to provide ~~the~~a $125 million working capital senior secured revolving credit facility; (iii) that certain commitment letter, as amended, entered into on September 12, 2008, among the Company, orSilver toPoint Finance, ~~our~~LLC ~~various~~(“Silver ~~constituents~~Point”) inand Monarch Master Funding Ltd (“Monarch” and together with Silver Point, the ~~bankruptcy~~“NMTL orLenders”) aspursuant to which the ~~ultimate~~NMTL ~~recovery~~Lenders ofcommit, ~~value~~on the terms and conditions ~~available~~specified therein, to ~~such~~provide ~~constituents~~a $344 million first lien term loan credit facility.

8Under the terms of the Plan, we cannot emerge from Chapter 11 until these exit financings are consummated. Since the Plan was confirmed, we have focused our efforts on negotiating and finalizing all documentation for these exit financings and satisfying the remaining conditions precedent to closing of the various transactions contemplated under the Plan, including the debt and equity financing commitments. Although progress has been made, significant issues remain to be resolved, including with respect to the exit financings and conditions precedent to funding under the various commitments. No assurance can be given that the exit financings will be closed and that the Plan will become effective. Further, in the event that one or more of the parties committed to provide the exit financing refuse or fail to perform under their respective commitments, we may seek to enforce our rights under the financing commitments or seek to replace any such financing or financings. There can be no assurance that any attempt to enforce the commitments or to obtain replacement financing will be successful.

~~After~~In ~~receiving~~the ~~Bankruptcy~~event ~~Court~~that ~~approval,~~our wePlan ~~entered~~does ~~into~~not ~~exit~~become ~~financing~~effective, ~~agreements~~we ~~with~~will ~~Silver Point~~continue ~~Finance~~our ~~L.L.C.~~efforts ~~and~~to ~~its~~maximize ~~affiliated investment funds and plan funding agreements with holders~~the ofvalue ~~approximately 95%~~ of the ~~funded~~bankruptcy ~~amounts~~estates, ~~outstanding~~which ~~under~~may ~~our~~include, ~~pre-petition~~but ~~senior~~not ~~secured~~be ~~credit facility.~~limited ~~This~~to, ~~financing~~the issale ~~contingent~~of ~~upon,~~the ~~among~~Company or ~~other~~some ~~things,~~or usall ~~reaching~~of ~~agreement~~our onassets, ~~and achieving~~infusion ~~ratification~~ of capital, ~~the~~debt ~~changes~~restructuring toor ~~our~~any ~~collective~~combination ~~bargaining~~of ~~agreements with our major~~these ~~unions~~options. ~~necessary~~There tocan ~~implement~~be ~~our~~no ~~business~~assurance ~~plan,~~as ~~which~~ to ~~date~~whether we ~~have~~will ~~not~~be ~~achieved.~~able Onto ~~November 5,~~successfully ~~2007,~~implement weany ~~filed~~such strategy aon ~~Plan~~terms ofand ~~Reorganization~~conditions ~~and~~acceptable ~~related~~to ~~Disclosure~~us ~~Statement~~or ~~with~~to ~~the~~our ~~Bankruptcy Court~~various ~~based~~constituents ~~upon~~in the ~~exit~~bankruptcy, and ~~financing~~absent ~~commitment~~the byability ~~Silver~~to ~~Point~~pursue ~~Finance~~such ~~L.L.C.~~a ~~and~~strategy, ~~plan~~we ~~funding agreements.~~expect ~~Our exclusive period within which~~ to ~~file~~begin aan ~~plan~~orderly wind-down of ~~reorganization expired on~~our ~~November 8, 2007~~operations. ~~Our~~There ~~exclusive~~can ~~period~~be ~~within~~no ~~which~~assurance as to ~~solicit~~the ~~acceptances~~ultimate recovery of ~~our~~value ~~plan~~available ofto our ~~reorganization~~constituents ~~expires~~should onour ~~January 7,~~Plan ~~2008~~not be consummated.

WeOur ~~have~~financial ~~established~~statements ~~bidding~~are ~~procedures~~prepared on a going-concern basis, which ~~have~~contemplates ~~been~~the ~~approved~~realization of byassets and the ~~Bankruptcy~~satisfaction ~~Court~~of liabilities in the normal course of business. However, tobecause ~~govern~~of the Chapter 11 filing process ~~for~~and ~~soliciting~~our ~~alternative~~recurring ~~investment~~losses ~~proposals~~from operations, negative working capital, and downward sales trends, along with our potential lack of liquidity should we be unable to successfully reorganize under Chapter 11, there is substantial doubt about our ability to continue as a going concern. ~~Under~~Our continuation as a going concern is dependent upon, among other things, whether the ~~procedures~~Plan becomes effective, ~~indications~~our ability to comply with the terms of the DIP Facility, our ~~interest~~ability ~~were~~to ~~due~~negotiate byan ~~November 28~~extension of, ~~2007~~and ~~with~~increase ~~final~~in ~~proposals~~the ~~due~~amount available under, our DIP Facility, onif ~~January 15~~needed, ~~2008.~~or Ifrefinance ~~multiple~~our ~~viable~~DIP ~~proposals~~Facility ~~are~~at ~~received~~its maturity, anour ~~auction~~ability isto ~~currently~~implement ~~scheduled~~our business plan, our ability to beimplement ~~held~~the onPlan, ~~January 22~~if it becomes effective, ~~2008.~~and ~~There~~the transactions contemplated ~~can~~thereby beand noour ~~assurance~~ability ~~that~~to ~~the~~generate ~~necessary~~sufficient ~~financing~~cash from operations to ~~fund~~meet aour ~~standalone~~obligations ~~plan~~and any combination of these factors. In the event our restructuring activities are not successful and we are required to ~~emerge~~liquidate, ~~from~~additional significant adjustments would be necessary in the carrying ~~bankruptcy~~value ~~will~~of assets and liabilities, the revenues and expenses reported and the balance sheet classifications used. Further, the value of debt and equity interests may be ~~provided~~significantly toor completely usimpaired onin ~~acceptable~~the ~~terms~~event of a liquidation or atconversion ~~all~~to a Chapter 7 proceeding.

~~See~~The ~~Note~~consolidated ~~13.~~financial ~~Restructuring~~statements ~~Charges~~reflect ~~(Credits)~~adjustments toin ~~these~~accordance ~~condensed~~with ~~consolidated~~American ~~financial~~Institute ~~statements~~of ~~for~~Certified ~~related~~Public orAccountants’ ~~additional~~Statement ~~disclosures.~~of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy

~~Our financial statements are prepared on a going-concern basis, which contemplates the realization~~8 of assets and the satisfaction of liabilities in the normal course of business. However, because of the Chapter 11 filing process and our recurring losses from operations, negative working capital, downward sales trends, and the potential lack of liquidity should we be unable to successfully reorganize under Chapter 11, there is substantial doubt about our ability to continue as a going concern. Our continuation as a “going concern” is dependent upon, among other things, our ability to evaluate and execute various alternatives including the sale of some or all of our assets, infusion of capital, debt restructuring and the development, confirmation and implementation of a plan of reorganization, our ability to comply with the terms of the DIP Facility, our ability to negotiate an extension of or refinance our DIP Facility at its maturity, our ability to implement our restructuring activities, our ability to obtain concessions from our labor unions, our ability to obtain financing upon exit from bankruptcy and our ability to generate sufficient cash from operations to meet our obligations and any combination of these factors. In the event our restructuring activities are not successful and we are required to liquidate, additional significant adjustments will be necessary in the carrying value of assets and liabilities, the revenues and expenses reported and the balance sheet classifications used.

TheTable condensed consolidated financial statements reflect adjustments in accordance with American Institute of Certified Public Accountants’ Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (SOP 90-7), which was adopted for financial reporting in periods ending after September 22, 2004, assuming that we will continue as a going concern. In the Chapter 11 proceedings, substantially all unsecured liabilities except payroll and benefit related charges as of the Petition Date are subject to compromise or other treatment under a plan of reorganization which must be confirmed by the Bankruptcy Court after submission to any required vote by affected parties. For financial reporting purposes, those liabilities and obligations whose treatment and satisfaction is dependent on the outcome of the Chapter 11 proceedings are segregated and classified as Liabilities Subject to Compromise in the consolidated balance sheet under SOP 90-7. The ultimate amount of and settlement terms for our pre-bankruptcy liabilities are dependent on the outcome of the Chapter 11 proceedings and, accordingly, are not presently determinable. Pursuant to SOP 90-7, professional fees associated with the Chapter 11 proceedings, and certain gains and losses resulting from a reorganization of our business are reported separately as reorganization items. In addition, interest expense is reported only to the extent that it will be paid during the Chapter 11 proceedings or that it is probable that it will be an allowed claim under the bankruptcy proceedings. Contents

9Code (SOP 90-7), which was adopted for financial reporting in periods ending after September 22, 2004, assuming that we will continue as a going concern. In the Chapter 11 proceedings, substantially all liabilities except payroll and benefit related charges as of the Petition Date are subject to compromise or other treatment under a plan of reorganization which must be confirmed by the Bankruptcy Court after submission to any required vote by affected parties. For financial reporting purposes, those liabilities and obligations whose treatment and satisfaction is dependent on the outcome of the Chapter 11 proceedings are segregated and classified as Liabilities Subject to Compromise in the consolidated balance sheet under SOP 90-7. The ultimate amount of and settlement terms for our pre-bankruptcy liabilities are dependent on the outcome of the Chapter 11 proceedings and, accordingly, are not presently determinable. Pursuant to SOP 90-7, professional fees associated with the Chapter 11 proceedings, and certain gains and losses resulting from a reorganization of our business are reported separately as reorganization items. In addition, interest expense is reported only to the extent that it will be paid during the Chapter 11 proceedings or that it is probable that it will be an allowed claim under the bankruptcy proceedings.

2. Description of Business and Significant Accounting Policies

Description of Business

Interstate Bakeries Corporation is one of the largest wholesale bakers and distributors of fresh bakery products in the United States. The accompanying unaudited condensed consolidated financial statements, included herein, have been prepared in accordance with U.S. generally accepted ~~accounting~~ accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes ~~required~~ required by U.S. generally accepted accounting principles for complete financial statements. In the ~~opinion~~ opinion of management, all adjustments (consisting of normal recurring accruals except for the American Bakers Association Retirement Plan actuarial gain and settlement discussed in Note 11. Employee Benefit Plans) considered necessary for a fair presentation have been included. Operating results for the twelve and twenty-four weeks ended November 1715, ~~2007~~2008 may not necessarily be indicative of the results for the full year ending May 3130, ~~2008~~2009.

The consolidated balance sheet presented at ~~June~~May 231, ~~2007~~2008 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended ~~June~~May 231, ~~2007~~2008.

Unless the context indicates otherwise, “IBC,” “us,” “we,” and “our” refers to Interstate Bakeries Corporation and its subsidiaries, taken as a whole.

Significant Accounting Policies

For further information, refer to Significant Accounting Policies in our Annual Report on Form 10-K for the year ended ~~June~~May 231, ~~2007~~2008.

Fiscal Year End

Our fiscal year is a 52 or 53-week period ending on the Saturday closest to the last day of May.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of IBC and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in ~~the financial statements and accompanying notes. Actual results~~ ~~could differ from those estimates.~~

~~Cash and Cash equivalents~~9

WeTable consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Additionally, included in accounts payable are checks written in excess of recorded balances totaling approximately $27.3 million and $32.9 million at November 17, 2007 and June 2, 2007, respectively. Restricted cash represents cash held as collateral pursuant to our debtor-in-possession financing agreement and is not considered a cash equivalent in the consolidated statement of cash flows. See Note 8. Debt to these condensed consolidated financial statements for related disclosures. Contents

~~Contingencies~~the financial statements and accompanying notes. Actual results could differ from those estimates.

~~Various~~Cash ~~lawsuits, claims~~ and ~~proceedings~~Cash ~~are pending against us. In accordance with Statement of~~Equivalents Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, we record accruals for such contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. See Note 16. Commitments and Contingencies to these condensed consolidated financial statements for related disclosures.

10We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Additionally, included in accounts payable are checks written in excess of recorded balances totaling approximately $18.4 million and $11.5 million at November 15, 2008 and May 31, 2008, respectively. Restricted cash represents cash held as collateral pursuant to our debtor-in-possession financing agreement and is not considered a cash equivalent in the consolidated statement of cash flows. See Note 8. Debt to these condensed consolidated financial statements for related disclosures.

~~Newly Adopted Accounting Pronouncements~~Contingencies

InVarious ~~July 2006~~lawsuits, ~~the~~claims ~~Financial~~and ~~Accounting~~proceedings ~~Standards~~are ~~Board~~pending ~~(FASB) issued~~against ~~FASB Interpretation (FIN) No~~us. ~~48,~~ ~~Accounting~~In ~~for~~accordance ~~Uncertainty~~with inStatement ~~Income Taxes — an interpretation~~ of Financial ~~FASB~~Accounting ~~Statement~~Standards (SFAS) No. ~~109~~5, ~~(FIN 48).~~Accounting ~~FIN 48 clarifies the way that companies account~~ for ~~uncertainty in income taxes by prescribing a consistent recognition threshold and measurement attribute~~Contingencies, aswe ~~well~~record asaccruals ~~establishing criteria~~ for ~~subsequently recognizing, derecognizing, and measuring~~ such ~~tax~~contingencies ~~positions~~when ~~for~~it ~~financial statement purposes. The interpretation also requires expanded disclosure with respect to uncertain income tax positions. FIN 48~~ is ~~effective~~probable ~~for~~that ~~fiscal~~a ~~years~~liability ~~beginning~~will ~~after~~be ~~December 15,~~incurred ~~2006,~~ and ~~was effective for us in~~ the ~~first~~amount ~~quarter~~ of ~~fiscal~~loss ~~2008~~can be reasonably estimated. See Note 1516. ~~Income~~Commitments ~~Taxes~~and Contingencies to these condensed ~~consolidated~~ consolidated financial statements for related disclosures.

~~Recently~~Certain ~~Issued~~Concentrations ~~Accounting~~of ~~Pronouncements~~Risk

InApproximately ~~December 2007,~~82% ~~the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment~~ of ~~ARB~~our ~~No.51~~employees ~~(SFAS~~are ~~160).~~covered ~~SFAS~~by ~~160~~collective ~~requires~~bargaining ~~all entities to report noncontrolling interest in subsidiaries as equity in the consolidated financial statements~~agreements. ~~Additionally,~~ ~~SFAS~~No ~~160 requires that all accounting transactions between an entity and~~significant ~~noncontrolling~~percentage ~~interests~~of toour beunion ~~treated~~labor asforce ~~equity transactions. SFAS 160~~ is ~~effective~~covered asby ofagreements ~~the beginning~~that ofwill ~~the~~expire ~~first~~in ~~fiscal~~one year ~~beginning on or after December 15, 2008, and is effective for us at the beginning of fiscal 2010~~. ~~Earlier adoption is prohibited.~~

InNewly ~~December 2007,~~Adopted ~~the~~Accounting ~~FASB issued SFAS No. 141R, Business Combinations (SFAS 141R), which revised~~Pronouncements SFAS 141. SFAS 141R requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction and any noncontrolling interest in the acquiree; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires the acquirer to disclose all information needed to evaluate and understand the nature and financial effect of the business combination; and requires the acquirer to expense acquisition-related costs in the periods in which the costs are incurred and the services are received except for the costs to issue debt or equity securities. SFAS 141R is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008, and is effective for us at the beginning of fiscal 2010. Earlier adoption is prohibited.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities (SFAS 159). SFAS 159 is effective as of the beginning of the first fiscal year beginning after November 15, 2007, and iswas effective for us at the beginning of fiscal 2009. SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value that are not currently required to be measured at fair value. Accordingly, companies would then be required to report unrealized gains and losses on these items in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. We ~~are~~did ~~currently~~not inelect the ~~process~~fair ofvalue ~~evaluating~~treatment ~~the~~for any ~~effects~~financial ofasset ~~the~~or ~~adoption~~liability ofunder SFAS 159 onat ~~our~~the ~~consolidated~~beginning ~~results~~ of ~~operations,~~fiscal ~~cash flows, and financial position~~2009.

In ~~September~~May ~~2006~~2008, the FASB issued SFAS No. ~~158~~162, ~~Employers’~~The ~~Accounting~~Hierarchy ~~for~~of ~~Defined~~Generally ~~Benefit~~Accepted ~~Pension~~Accounting ~~and~~Principles ~~Other Postretirement Plans~~ (SFAS ~~158~~162). ~~We adopted the recognition and disclosure requirements of~~ SFAS ~~158~~162 inidentifies the ~~fourth~~sources ~~quarter~~ of ~~fiscal~~accounting ~~2007.~~principles ~~Additionally,~~and ~~SFAS~~the ~~158 requires companies to~~framework ~~measure~~for ~~plan~~selecting ~~assets~~the ~~and~~principles ~~obligations~~to atbe ~~their~~used ~~fiscal~~in ~~year-end~~the ~~balance~~preparation ~~sheet~~of ~~date.~~financial ~~This~~statements ~~requirement~~of isnongovernmental ~~effective~~entities ~~for~~that ~~fiscal~~are ~~years~~presented ~~ending~~in ~~after~~conformity ~~December 15,~~with ~~2008~~generally ~~and~~accepted ~~will~~accounting principles ~~be effective for us~~ in the ~~fourth~~ ~~quarter~~United ~~of fiscal 2009~~States. WeSFAS ~~are~~162 ~~currently~~was ineffective ~~the~~November 15, ~~process~~2008. ofThe ~~evaluating~~adoption ~~the effects~~ of ~~the~~SFAS ~~measurement~~162 ~~date~~did ~~provision~~not ofhave ~~SFAS~~an ~~158~~impact on our consolidated results of operations, cash flows, and ~~financial~~ financial position.

InRecently ~~September 2006,~~Issued ~~the~~Accounting ~~FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157~~Pronouncements defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. This statement applies whenever other statements require or permit assets or liabilities to be measured at fair value. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and will be effective for us in the first quarter of fiscal 2009. We are currently in the process of evaluating the effects of the adoption of SFAS 157 on our consolidated results of operations, cash flows, and financial position.

11In April 2008, the FASB issued FASB Staff Position (FSP) No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors to be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP 142-3 expands the disclosure requirements of SFAS 142 and is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. This statement is effective for us in the first quarter of fiscal 2010. The guidance for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. The adoption of FSP 142-3 will have an impact on our accounting for future acquisitions of intangible assets and our disclosures of

~~3. Inventories~~10

TheTable components of inventories are as follows: Contents

	November 17,		June 2,
	2007		2007
	(dollars in thousands)
Ingredients and packaging	$	33,888	$	43,279
Finished goods		19,925		22,403
	$	53,813	$	65,682

intangible assets as a whole on a prospective basis once adopted; however, the materiality of that impact cannot be determined.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires enhanced disclosures about derivative and hedging activities. The FASB issued FSP No. 133-1 and FIN 45-4, which further clarified the effective date of SFAS 161 to be the first reporting period (annual or quarterly interim) beginning after November 15, 2008, and is effective for us at the beginning of the third quarter of fiscal 2009. ~~Property~~Early application is encouraged. The adoption of SFAS 161 may have an impact on our disclosures for derivatives instruments and ~~Equipment~~such disclosures are under review.

~~Property~~In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No.51 (SFAS 160). SFAS 160 requires all entities to report noncontrolling interest in subsidiaries as equity in the consolidated financial statements. Additionally, SFAS 160 requires that all accounting transactions between an entity and noncontrolling ~~equipment~~interests ~~consists~~to be treated as equity transactions. SFAS 160 is effective as of the beginning ~~following:~~of the first fiscal year beginning on or after December 15, 2008, and is effective for us at the beginning of fiscal 2010. Earlier adoption is prohibited. We are currently in the process of evaluating the effects of the adoption of SFAS 160 on our consolidated results of operations, cash flows, and financial position.

	November 17,			June 2,
	2007			2007
	(dollars in thousands)
Land and buildings (lives ranging from 10 to 35 years)	$	389,917		$	390,147
Machinery and equipment (lives ranging from 4 to 15 years)		845,481			865,398
		1,235,398			1,255,545
Less accumulated depreciation		(723,945	)		(713,820	)
	$	511,453		$	541,725

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R), which revised SFAS 141. SFAS 141R requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction and any noncontrolling interest in the acquiree; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires the acquirer to disclose all information needed to evaluate and understand the nature and financial effect of the business combination; and requires the acquirer to expense acquisition-related costs in the periods in which the costs are incurred and the services are received except for the costs to issue debt or equity securities. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, and is effective for us at the beginning of fiscal 2010. Earlier adoption is prohibited. The adoption of SFAS 141R would have an impact on our accounting for future business combinations on a prospective basis once adopted; however, the materiality of that impact cannot be determined.

OnIn ~~October~~September 202006, ~~2007,~~the weFASB ~~exited~~issued ~~the~~SFAS ~~bread~~No. 157, ~~market~~Fair inValue ~~Southern~~Measurements ~~California~~(SFAS 157). ~~This~~SFAS ~~action~~157 defines ~~entailed~~fair ~~the closure~~value, ofestablishes ~~four~~a ~~bakeries~~framework ~~and~~for ~~the~~using ~~consolidation~~fair ofvalue ~~routes~~to measure assets and ~~distribution~~liabilities, and ~~centers~~expands disclosures about fair value measurements. AtThis ~~August 25,~~statement applies whenever other ~~2007,~~statements ~~based~~require ~~upon~~or ~~our~~permit ~~intention~~assets or liabilities to ~~pursue~~be ~~this~~measured ~~plan~~at offair ~~action~~value. ~~and~~SFAS ~~our~~157 ~~expectation~~is effective offor ~~the~~fiscal ~~disposal~~years ~~of the~~beginning ~~related~~after ~~assets~~November 15, we2007. ~~tested~~However, ~~the~~FSP ~~related~~No. FAS ~~long~~157-~~lived~~2 ~~assets~~deferred the ~~for~~Statement’s ~~recoverability~~effective ~~using~~date ~~a probability~~for certain non-~~weighted~~financial ~~approach~~assets ~~for~~and ~~continued~~liabilities ~~use~~to orfiscal ~~disposal~~years beginning ofafter ~~certain~~November 15, ~~assets~~2008, and ~~recorded~~will ~~an impairment~~be ofeffective ~~approximately~~for ~~$10.2 million~~us in the first quarter of fiscal ~~2008~~ 2010. ~~During~~We ~~the~~are ~~second quarter~~currently ofin ~~fiscal~~the ~~2008,~~process ~~final~~of ~~determination~~evaluating ~~was~~the ~~made~~effects ~~concerning~~of the ~~continued~~adoption ~~use or disposal~~ of ~~certain~~ ~~assets~~SFAS ~~which~~157 ~~resulted~~on inour consolidated aresults ~~net valuation credit adjustment~~ of ~~approximately~~operations, ~~$0.4 million~~cash ~~to the~~flows, ~~initial~~and ~~impairment~~financial ~~charge~~position.

~~The net book value of the total assets related to the Southern California restructuring activities, including those adjusted for impairment, aggregates approximately $18~~3.~~4 million.~~ ~~These assets have~~Inventories not been classified as held for sale at November 17, 2007 as all of the criteria for such classification under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), had not been met.

~~Included~~The incomponents ~~depreciation~~of ~~and~~inventories ~~amortization~~are ~~expense~~as ~~is approximately $11.4 million and $12.1 million~~follows: for the twelve week and $23.2 million and $24.6 million for the twenty-four week periods ended November 17, 2007 and November 18, 2006, respectively, that relates to property and equipment used in our production process.

5. Assets Held for Sale


	November 15,		May 31,
	2008		2008
	*(dollars in thousands)*
Ingredients and packaging	$	38,604	$	38,986
Finished goods		21,536		22,851


	$	60,140	$	61,837

~~We have classified certain long-lived assets as held for sale in the consolidated balance sheets in accordance with the guidance in SFAS 144~~4. ~~Assets~~Property ~~classified as held for sale are part of our ongoing effort to address revenue declines, cost structure~~ and ~~productive capacity in our physical~~Equipment facilities. In the second quarter of fiscal 2008, approximately $0.8 million of these assets were sold. In addition, two excess properties valued at approximately $0.4 million were identified and reclassified to assets held for sale. At November 17, 2007, the total assets held for sale were approximately $0.6 million, all of which are expected to be sold within the next 12 months.

1211

NetTable gains realized on the sale of our assets held for sale in the second quarter of fiscal 2008 and 2007 amounted to approximately $0.5 million and $5.4 million, respectively, while year-to-date net gains for fiscal 2008 and 2007 were approximately $0.6 million and $6.5 million, respectively. See Note 13. Restructuring Charges (Credits) to these condensed consolidated financial statements for further information on net gains related to restructuring activities. Contents

6.Property ~~Lease~~and ~~Obligations~~equipment consists of the following:

In the normal course of business, we enter into leases for office, transportation and delivery equipment as well as real estate leases used for both our retail outlets and as depots and warehouses in our distribution system. The majority of the operating leases contain renewal options for varying periods. Certain leases provide us with an option to acquire the related equipment at a fair market value during or at the end of the lease term.


	November 15,			May 31,
	2008			2008
	*(dollars in thousands*)
Land and buildings (lives ranging from 10 to 35 years)	$	358,778		$	359,133
Machinery and equipment (lives ranging from 4 to 15 years)		808,395			820,484


		1,167,173			1,179,617
Less accumulated depreciation		(722,559	)		(715,162	)


	$	444,614		$	464,455

AtIn ~~November~~August ~~17,~~ 2007, we ~~had~~announced inour ~~place~~intention ~~various~~to ~~operating~~exit ~~leases for equipment on which at~~ the ~~end~~bread ~~of the~~market ~~lease~~in ~~term~~Southern ~~we had guaranteed a buyout price, or residual value~~California. OnThis entailed the ~~effective~~closure ~~date~~ of ~~FIN No. 45,~~four ~~Guarantor’s~~bakeries ~~Accounting~~ and ~~Disclosure~~the ~~Requirements~~consolidation ~~for Guarantees Including Indirect Guarantees~~ of ~~Indebtedness~~routes ofand ~~Others,~~distribution wecenters. Based ~~were~~upon ~~required~~our intention to ~~disclose~~pursue ~~the~~this ~~undiscounted~~plan ~~maximum potential liability~~ of ~~all~~action ~~guaranteed lease residual values~~ and toour ~~record~~expectation aof ~~liability for~~ the ~~fair value~~disposal of ~~such~~the related ~~guarantees. At November 17~~assets, ~~2007,~~we tested the ~~maximum~~related ~~potential~~long-lived ~~liability~~assets for ~~all guaranteed lease residual values was approximately $3~~recoverability.~~6 million,~~ ~~including~~Included ~~amounts~~in ~~guaranteed prior and~~the ~~subsequent~~condensed toconsolidated ~~the~~statement ~~effective date~~ of ~~approximately~~operations ~~$0.2 million~~for ~~and~~the ~~$3.4 million,~~twenty-four ~~respectively.~~weeks At ended November 17, 2007, ~~we had~~ is an ~~unamortized~~impairment ~~liability~~loss ~~for~~to the ~~fair~~carrying value of ~~all~~these ~~guaranteed~~assets ~~lease residual values that were entered into or modified subsequent to the effective date~~ of approximately $09.18 million.

7Included in depreciation and amortization expense is approximately $10.5 million ~~Intangible~~and ~~Assets~~$11.4 million for the twelve week and $21.0 million and $23.2 million for the twenty-four week periods ended November 15, 2008 and November 17, 2007, respectively, that relates to property and equipment used in our production process.

~~Intangible~~5. ~~assets~~Assets ~~consist~~Held offor ~~the following:~~Sale

	November 17,			June 2,
	2007			2007
	(dollars in thousands)
Intangible assets with indefinite lives (generally trademarks and trade names)	$	157,471		$	157,471
Intangible assets with finite lives
Gross carrying amount	$	13,854		$	13,854
Less: Accumulated amortization		(11,459	)		(11,086	)
Deferred contract asset adjustment		(600	)		—
Net carrying amount	$	1,795		$	2,768

We have classified certain long-lived assets as held for sale in the consolidated balance sheets in accordance with the guidance provided by SFAS 144. Assets classified as held for sale reflect our ongoing effort to address revenue declines, cost structure and productive capacity in our physical facilities. Total assets held for sale at May 31, 2008 were approximately $17.6 million. Through the second quarter of fiscal 2009, we sold approximately $4.3 million of these assets with $42,000 additional properties being classified as held for sale. At November 15, 2008, total assets held for sale were approximately $13.3 million, all of which are expected to be sold within 12 months of classification as held for sale.

~~Intangible~~Net ~~amortization~~gains ~~expense~~realized on the sale of our assets held for sale in the second quarter of ~~both~~ fiscal ~~2008~~2009 and 2008 ~~2007~~amounted ~~was~~ to approximately $02.2 million and $0.5 million, respectively, while year-to-date net gains for ~~both~~fiscal ~~2008~~2009 and ~~2007~~2008 ~~intangible~~were ~~amortization expense~~approximately ~~was~~$7.2 million ~~approximately~~and $0.46 million, respectively. ~~These~~The majority ~~amounts~~of ~~were~~the ~~primarily~~gains ~~recorded~~realized on our asset sales relates to our restructuring activities and are classified as along-lived ~~reduction~~asset ofcredits ~~net~~to our restructuring charges. See Note 13. Restructuring ~~sales~~Charges (Credits) to these consolidated financial statements for related disclosures.

~~In connection with our exit of the bread market in Southern California, during the second quarter of fiscal 2008, we cancelled a private label fresh baked goods agreement~~6. ~~This~~Lease ~~contract~~Obligations ~~cancellation resulted in the elimination of a deferred contract asset in the amount of $0.6 million and the related liability.~~

13In the normal course of business, we enter into leases for office, transportation and delivery equipment, as well as real estate leases both for our retail outlets and for depots and warehouses in our distribution system. Many of the operating leases contain renewal options for varying periods. Certain leases provide us with an option to acquire the related equipment at fair market value during or at the end of the lease term.

8We have various operating leases in place for equipment for which we have guaranteed a buyout price or residual value at the end of the lease term. ~~Debt~~Substantially all such leases expire before the end of the third quarter of fiscal 2009. At November 15, 2008, the maximum potential liability for all guaranteed lease residual values was approximately $1.0 million and we had no unamortized balance remaining for the fair value originally recorded for these guaranteed lease residual values.

~~Long-term debt consists of the following:~~12

	November 17,			June 2,
	2007			2007
	(dollars in thousands)
Secured
Post-petition credit agreement	$	—		$	—
Senior secured credit facility – pre-petition		450,178			447,757
Unsecured
6% senior subordinated convertible notes – pre-petition		99,999			99,999
Capital lease converted to pre-petition debt		6,125			6,125
Capital leases
Real estate		3,264			3,758
		559,566			557,639
Less:
Current portion		(453,442	)		(451,515	)
Pre-filing date claims included in liabilities subject to compromise		(106,124	)		(106,124	)
Long-term debt	$	—		$	—

~~Post-Petition~~7. ~~Credit~~Intangible ~~Agreement~~Assets

OnIntangible September 23, 2004, we entered into the DIP Facility, which was amended and restated on February 16, 2007 and which provides for a $200.0 million Commitment of financing to fund our post-petition operating expenses, supplier and employee obligations. The DIP Facility originally provided for a secured revolving line of credit through September 22, 2006, which date has been extended by amendment to June 2, 2008. The Commitment additionally provides, with certain restrictions, for the issuance of letters of credit in the aggregate amount up to $150.0 million (increased from the original limitation of $75.0 million as a result of prior amendments) of which $122.1 million was utilized at November 17, 2007. These letters of credit were partially collateralized by approximately $19.2 million of restricted cash at November 17, 2007, as required by the DIP Facility. We pay fees of 3.0% on the balance of all letters of credit outstanding under the DIP Facility. The Commitment is subject to the maintenance of a satisfactory Borrowing Base as defined by the DIP Facility. Obligations under the DIP Facility are secured by a superpriority lien in favor of the Lenders over virtually all of our assets. ~~Interest~~consist on borrowings under the DIP Facility is at either the alternate base rate (as defined in the DIP Facility) plus 1.75%, or, at our option, the London Interbank Offered Rate (LIBOR) plus 2.75%. We also pay a commitment fee of ~~0.50%~~ on the ~~unused portion of the DIP Facility. Interest is payable monthly in arrears. As of~~following: November 17, 2007, there were no borrowings outstanding under the DIP Facility and we had $51.8 million available under the DIP Facility (of which up to $27.9 million could be used for the issuance of additional letters of credit).

The DIP Facility subjects us to certain obligations, including, but not limited to, the delivery of financial statements, cash flow forecasts, operating budgets and a strategic business plan at specified intervals and cumulative minimum EBITDA covenants. Furthermore, we are subject to certain limitations on the payment of indebtedness, entering into investments, the payment of capital expenditures, the incurrence of cash restructuring charges and the payment of dividends. In addition, payment under the DIP Facility may be accelerated following certain events of default including, but not limited to, (1) the conversion of any of the bankruptcy cases to cases under Chapter 7 of the Bankruptcy Code or the appointment of a trustee pursuant to Chapter 11 of the Bankruptcy Code; (2) our making certain payments of principal or interest on account of pre-petition indebtedness or payables; (3) a change of control (as defined in the DIP Facility); (4) an order of the Bankruptcy Court permitting holders of security interests to foreclose on the debt on any of our assets which have an aggregate value in excess of $1.0 million; and (5) the entry of any judgment in excess of $1.0 million against us, the enforcement of which remains unstayed. At November 17, 2007, we were in compliance with all financial covenants, terms and conditions of the DIP Facility.


	November 15,			May 31,
	2008			2008
	*(dollars in thousands)*
Intangible assets with indefinite lives (generally trademarks and trade names)	$	157,471		$	157,471


Intangible assets with finite lives
Gross carrying amount	$	3,491		$	3,491
Less: Accumulated amortization		(2,704	)		(2,677	)


Net carrying amount	$	787		$	814

14Intangible amortization expense for the second quarter and year-to-date for fiscal 2009 was approximately $13,000 and $27,000, respectively. In the second quarter and year-to-date for fiscal 2008, intangible amortization expense was approximately $0.2 million and $0.4 million, respectively, which was primarily recorded as a reduction of net revenues.

~~To date in fiscal 2008, the following amendments to the DIP Facility have been completed~~8. OnDebt October 1, 2007, we entered into the first amendment which (1) amended the definition of the Borrowing Base to include an additional reserve of $10.0 million until such time as the Bankruptcy Court enters a final order approving (a) a disclosure statement that provides for payment in full of the DIP Facility obligations, and (b) evidence of a commitment for exit financing associated with a plan of reorganization; (2) increased the maximum allowable cash restructuring charges incurred since December 17, 2006 from $10.0 million to $23.0 million; and (3) established a requirement that, in the event we do not publicly announce that we have reached an agreement in principal with our two largest union groups, the BCTGM and IBT regarding certain concessions and alignment with our business plan, we submit a plan to the lenders on or before December 1, 2007 that describes our strategy for maximizing the value of the bankruptcy estates through a sale of the Company or its assets, all as described in the amendment.

The second amendment, dated November 29, 2007, changed the date for delivery of a revised plan detailing the Borrower’s proposed strategy for maximizing the value of the bankruptcy estates. If on or before January 29, 2008, IBC has not reached an agreement in principle with our two largest union groups and Silver Point Finance L.L.C. (or an approved provider of alternate exit financing, if applicable) has not announced its support of the labor agreements, then, the lenders may request in writing a plan to be delivered within twentyLong-~~one~~term ~~days~~debt ofconsists ~~receipt~~ of the ~~written request.~~following:

On December 19, 2007, we entered into the third amendment to the DIP Facility which (1) extended the maturity date from February 9, 2008 to June 2, 2008; (2) redefined the real property component of the borrowing base to the lesser of (a) $80.0 million or (b) 40% of the borrowing base inclusive of the real property component but excluding the Plan Reserve (as defined therein); (3) amended the permitted capital expenditures by fiscal quarter through the quarter ending May 31, 2008; (4) amended the minimum cumulative consolidated EBITDA by fiscal quarter through the quarter ending May 31, 2008; and (5) limited cash restructuring charges for the fiscal period beginning December 17, 2006 and ending May 31, 2008 to $23.0 million.


	November 15,		May 31,
	2008		2008
	*(dollars in thousands)*
Secured
Post-petition credit debt	$	113,191	$	63,358
Pre-petition credit debt		451,486		450,248
Unsecured
6% senior subordinated convertible notes — pre-petition		99,999		99,999
Capital lease converted to pre-petition debt		6,125		6,125
Capital leases
Real estate		2,405		2,759


	$	673,206	$	622,489


Balance sheet classification:
Pre-petition debt	$	2,405	$	2,759
Post-petition debt		113,191		63,358
Liabilities subject to compromise		557,610		556,372


	$	673,206	$	622,489

~~Senior~~Post-Petition ~~Secured Credit Facility~~Debt

~~During~~On ~~fiscal~~September 23, ~~year 2002~~2004, we entered into athe ~~$900.0 million~~DIP ~~Senior Secured Credit~~ Facility ~~agreement with~~to afund ~~syndicate~~our ~~of banks and institutional lenders which includes (1) a five~~post-~~year~~petition ~~$375.0 million~~operating ~~tranche A term loan~~expenses, ~~repayable~~supplier inand ~~quarterly~~employee ~~installments; (2) a six-year $125~~obligations.~~0 million~~ ~~tranche~~The ~~B term~~DIP ~~loan,~~Facility ~~repayable~~has inbeen ~~quarterly~~amended ~~installments;~~numerous ~~(3) a six-year $100.0 million tranche C term loan~~times, ~~repayable~~most inrecently ~~quarterly~~on ~~installments; and (4)~~September a12, ~~five-year $300~~2008.~~0 million~~ ~~revolving~~At ~~loan~~November 15, or2008, the ~~revolver,~~ ~~which~~DIP ~~allowed~~Facility ~~for~~provided ~~up to $215.0 million~~ for ~~letters of credit. At November 17, 2007, we~~an ~~owed~~aggregate ~~$173.5 million,~~principal ~~$111.0 million,~~amount ~~$89.7 million~~of ~~and~~approximately $76309.0 million ~~under~~ (the ~~tranche A, tranche B, tranche C and the revolver, respectively~~“Commitment”). ~~During~~The ~~the twenty four weeks ended November~~September 1712, ~~2007,~~ ~~the~~2008 ~~outstanding~~amendment ~~debt~~to ~~under~~ the ~~revolver~~DIP ~~was~~Facility increased byour ~~$2.4 million~~Commitment ~~resulting~~and ~~from~~provided ~~draws~~for ~~against certain~~additional ~~letters~~funding of ~~credit~~ $16.0 million Aton ~~November~~January 1710, ~~2007~~2009, ~~outstanding~~subject ~~letters~~to of(a) delivery ~~credit aggregated $89.4 million and there was no availability for additional borrowing or issuance~~ of ~~letters~~a ofstatement ~~credit under~~certified ~~the revolver. The Senior Secured Credit Facility is secured~~ by ~~all accounts receivable and~~ a financial ~~majority~~officer of ~~owned~~the ~~real~~Company ~~property, intellectual property~~ and ~~equipment.~~each ~~Interest~~of onour ~~borrowings~~subsidiaries isthat ~~at either~~as ~~the~~of ~~ABR~~January 10, ~~(as~~2009 ~~defined~~certain conditions in the ~~Senior~~DIP ~~Secured Credit~~ Facility) ~~plus~~have ~~3.0%,~~been ~~3.25%,~~satisfied; ~~3.0%,~~(b) the ~~and~~Administrative ~~2.5% for~~Agent ~~tranche~~determining A,that ~~tranche B, tranche C, and~~ the ~~revolver, respectively, or at our option LIBOR plus~~Company ~~4.0%, 4.25%, 4.0%,~~ and ~~3.5%~~our ~~for~~subsidiaries ~~tranche~~are A,diligently ~~tranche~~pursuing B,confirmation ~~tranche~~of ~~C, and~~ the ~~revolver,~~Plan; ~~respectively. Interest~~and ~~on the outstanding borrowings at November~~(c) ~~17,~~payment ~~2007~~of ~~was 9.0%, 9.5%, 8.9%, and 8.6% for tranche A, tranche B, tranche C, and the revolver, respectively. We also pay~~ a ~~facility~~ fee ofin ~~0.50% on~~ the ~~revolving credit facility commitment (currently in the~~ amount of $~~165~~0.58 million) ~~and fees~~to ~~ranging~~the ~~from~~Administrative ~~3.625%~~Agent, tofor ~~4.0% on~~ the ~~balance~~ratable benefit of ~~all~~the ~~letters~~Tranche ofB lenders. ~~credit~~The ~~outstanding~~maturity ~~under~~date of the ~~revolver.~~

~~The Senior Secured Credit Facility agreement contains covenants that among other things (1) limit~~13 our ability to incur indebtedness, merge, consolidate and acquire, dispose of or incur liens on assets; and (2) limit aggregate payments of cash dividends on common stock and common stock repurchases.

DueTable to the secured nature of the Senior Secured Credit Facility, amounts outstanding are not considered as liabilities subject to compromise and interest, fees and expenses continue to be accrued and paid monthly. Contents

Commitment was extended by the September 12, 2008 amendment to February 9, 2009. At November 15, 2008, the Commitment included (1) a Tranche A loan commitment in the amount of approximately $74.0 million and (2) a Tranche B loan commitment in the amount of approximately $235.0 million. This Commitment is to be permanently reduced by an amount equal to the net proceeds from any asset sales as defined under the DIP Facility that are required to be remitted to the lenders for repayment of outstanding borrowings. Any reduction in the Commitment resulting from the remittance of proceeds from asset sales to the lenders will first be applied to Tranche A funded debt, then to cash collateralized letters of credit allocable to Tranche A, and when Tranche A utilization has been reduced to zero, then to Tranche B. The Commitment additionally provides, with certain restrictions, for the issuance of letters of credit in the aggregate amount up to $180.0 million of which $141.0 million was utilized at November 15, 2008. At November 15, 2008, the borrowings and letters of credit were partially collateralized by approximately $21.1 million of restricted cash, as required by the DIP Facility. We pay fees under the DIP Facility on the balance of all letters of credit outstanding under Tranche A and Tranche B of 3.00% and 4.50%, respectively, plus 0.25% per annum to the issuer of such letters of credit. Fees and expenses of approximately $7.2 million were incurred on the effective date of the September 12, 2008 amendment.

The Commitment is subject to the maintenance of a satisfactory Borrowing Base as defined by the DIP Facility. Obligations under the DIP Facility are secured by a superpriority lien in favor of the Lenders over virtually all of our assets. At November 15, 2008, we had outstanding borrowings of approximately $21.7 million and $91.5 million under Tranche A and Tranche B, respectively. Interest on borrowings is incurred at either the Alternate Base Rate (ABR) (as defined in the amended DIP Facility, which sets the ABR at a minimum of 4.25%) plus 2.00% and 3.50% for Tranche A and Tranche B, respectively, or at our option, the adjusted London Interbank Offered Rate (Adjusted LIBOR) (as defined in the amended DIP Facility, which sets the Adjusted LIBOR at a minimum of 3.25%) plus 3.00% and 4.50% for Tranche A and Tranche B, respectively. The aggregate interest rates on the outstanding borrowings at November 15, 2008 were 6.25% ~~Senior~~and ~~Subordinated~~7.75% ~~Convertible~~for ~~Notes~~Tranche A and Tranche B, respectively. We also pay a commitment fee of 0.50% per annum on the unused portion of the DIP Facility. Interest is payable monthly in arrears.

OnThe ~~August 12~~DIP Facility subjects us to certain obligations, ~~2004~~including, webut ~~issued~~not ~~$100.0 million~~limited ~~aggregate~~to, ~~principal~~the ~~amount~~delivery of financial ~~our~~statements, ~~6.0%~~cash ~~senior subordinated~~flow ~~convertible~~forecasts ~~notes~~and ~~due~~operating ~~August 15,~~budgets ~~2014~~at inspecified aintervals ~~private~~and cumulative ~~placement~~minimum earnings performance measure. ~~The~~Furthermore, ~~notes~~we are subject to certain ~~convertible~~limitations aton the ~~option~~payment of indebtedness, entering into investments, the ~~holder~~payment of capital expenditures, the incurrence of cash restructuring charges and the payment of dividends. In addition, payment under the DIP Facility may be accelerated following certain ~~circumstances~~events ~~into~~of ~~shares~~default including, but not limited to, (1) the conversion of ~~our~~any ~~common~~of ~~stock~~the bankruptcy cases to cases under atChapter 7 anof ~~initial~~the ~~conversion~~Bankruptcy ~~rate~~Code or the appointment of ~~98.9854~~a ~~shares~~trustee ~~per~~pursuant ~~$1,000~~to Chapter 11 of the Bankruptcy Code; (2) our making certain payments of principal ~~amount~~or interest on account of pre-petition ~~notes~~indebtedness or payables; (3) a change of control (as defined in the DIP Facility); (4) an ~~initial~~order of the Bankruptcy Court permitting holders of security interests to foreclose on the ~~conversion~~debt ~~price~~on any of our assets which have an aggregate value in excess of $100.~~1025~~3 million; ~~per~~and ~~share~~(5) the entry of any judgment in excess of $0.3 million against us, ~~subject~~the toenforcement ~~adjustment~~of which remains unstayed. At November 15, 2008, we were in compliance with all financial covenants, terms and conditions of the DIP Facility.

~~Other~~Pre-Petition ~~Matters~~Debt

WeDuring ~~have~~fiscal ~~classified~~year ~~all~~2002, ofwe ~~our~~entered ~~debt~~into ~~under~~a ~~the~~$900.0 million ~~senior~~Senior ~~secured~~Secured ~~credit~~Credit ~~facility~~Facility agreement with a syndicate of banks and ~~our~~institutional ~~capital~~lenders ~~leases~~which included (1) a five-year $375.0 million asTranche ~~payable~~A ~~within~~term ~~one~~loan, repayable in quarterly installments; (2) a six-year ~~due~~$125.0 million toTranche ~~various~~B term ~~defaults~~loan, ~~under~~repayable in quarterly installments; (3) a six-year $100.0 million Tranche C term loan, repayable in quarterly installments; and (4) a five-year $300.0 million revolving loan, or the revolver, ~~related~~which allowed for up to $215.0 million for letters of credit. ~~agreements~~At ~~including~~November 15, 2008, we ~~our~~had ~~Chapter~~outstanding borrowings of $173.4 11million, ~~filing~~$111.0 million, on$89.7 million ~~September~~and $77.3 22million under the Tranche A, ~~2004~~Tranche B, Tranche C and the revolver, respectively. ~~Under~~During the ~~bankruptcy~~twenty-four ~~code~~weeks ended November 15, ~~actions~~2008, tothe ~~collect~~outstanding debt under the revolver was increased by $1.2 million ~~pre-petition~~resulting ~~indebtedness~~from ~~are~~draws ~~stayed~~against certain letters of credit. At November 15, 2008, outstanding letters of credit aggregated $83.1 million and ~~our~~there ~~other~~was ~~contractual~~no ~~obligations~~availability ~~may~~for ~~not~~additional beborrowing ~~enforced~~or ~~against~~issuance usof letters of credit under the revolver. ~~Therefore~~The Senior Secured Credit Facility is secured by all accounts receivable and a majority of owned real property, ~~such~~intellectual ~~commitments~~property ~~may~~and ~~not~~equipment, which ~~reflect~~lien ~~actual~~is ~~cash~~subordinated ~~outlays~~to the superpriority lien of the DIP Facility. Interest on borrowings is at either the ABR (as defined in the ~~future~~Senior ~~period~~Secured Credit Facility) plus 3.00%, 3.25%, 3.00%, and 2.50% for Tranche A, Tranche B, Tranche C, and the revolver, respectively, or at our option LIBOR plus 4.00%, 4.25%, 4.00%, and

~~We have classified the 6% senior subordinated convertible notes and certain capital leases which~~14 were converted to pre-petition debt, all of which are unsecured, as liabilities subject to compromise and, in accordance with the guidance provided by SOP90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, we have suspended the accrual of interest on this debt.

DuringTable the second quarter of fiscal 2008, we incurred debt fees of $0.6 million for the October 1, 2007 amendment to our DIP Facility and a fee of $5.0 million to secure an exit facility commitment for financing to exit our Chapter 11 proceedings. These fees are included in other assets in the November 17, 2007 balance sheet. The exit financing agreement stipulates that under certain conditions, including the acceptance by the Bankruptcy Court of an alternative financing agreement, we may owe up to $12.0 million in breakup fees. Additionally, certain actions by the Bankruptcy Court concerning our emergence could result in the impairment of the $5.0 million commitment fee. Contents

93.50% ~~Derivative~~for ~~Instruments~~Tranche A, Tranche B, Tranche C, and the revolver, respectively. Interest rates on the outstanding borrowings at November 15, 2008 were 6.85%, 7.10%, 6.85% and 6.46% for Tranche A, Tranche B, Tranche C, and the revolver, respectively. We also pay a facility fee of 0.50% per annum on the revolving credit facility commitment (currently in the amount of $160.5 million) and fees ranging from 3.63% to 4.00% on the balance of all letters of credit outstanding under the revolver.

WeThe ~~are~~Senior ~~exposed~~Secured toCredit ~~market~~Facility ~~risks~~agreement ~~relative~~contains tocovenants ~~commodity~~that, ~~price~~among ~~fluctuations.~~other Tothings, ~~manage~~(1) limit our ~~the~~ability ~~volatility associated~~to ~~with~~incur ~~this~~indebtedness, ~~exposure~~merge, weconsolidate ~~utilize~~and ~~commodity~~acquire, ~~derivative~~dispose ~~instruments~~of toor ~~manage~~incur ~~certain~~liens on ~~commodity~~assets; ~~prices.~~and ~~All~~(2) limit ~~financial~~aggregate ~~instruments~~payments ~~are~~of ~~used~~cash ~~solely~~dividends ~~for~~on ~~hedging~~common ~~purposes~~stock and ~~are~~common ~~not~~stock ~~issued or held for speculative reasons~~repurchases.

~~Commodities~~Claims ~~we use in the production~~ of ~~our~~senior ~~products~~secured ~~are~~lenders ~~subject~~will tobe ~~wide~~impaired ~~price~~under ~~fluctuations, depending~~the ~~upon~~terms ~~factors~~of ~~such~~the ~~as weather, crop production, worldwide market supply and demand and government regulation~~Plan. ~~Our~~Due ~~objective is~~ to ~~utilize~~the impairment ~~commodity~~of ~~hedging~~these ~~derivatives~~claims, ~~including exchange~~amounts ~~traded~~due ~~futures~~under ~~and~~the ~~options~~Senior onSecured ~~wheat,~~Credit ~~corn,~~Facility ~~soybean~~are ~~oil~~included ~~and~~in liabilities ~~certain~~subject ~~fuels,~~ to ~~reduce our exposure to commodity price movements for future ingredient and energy needs~~compromise. ~~The~~We ~~strategy~~continue is to ~~purchase~~ ~~futures~~accrue and ~~options~~pay tocontractual ~~hedge~~interest ~~the~~and ~~variability of cash flows related to the underlying~~fees ~~commodity.~~under ~~The~~this ~~terms~~facility ofin ~~such~~accordance ~~instruments,~~with ~~and~~ the ~~hedging~~existing ~~transactions~~Bankruptcy toCourt ~~which they relate, generally do not exceed one year~~order.

We6% ~~enter~~Senior ~~into~~Subordinated ~~commodity~~Convertible ~~derivatives, principally wheat, corn, soybean oil, and heating oil, in~~Notes which we do not elect to apply hedge accounting. Realized and unrealized gains or losses on these positions are recorded in the consolidated statements of operations in cost of products sold or selling, delivery and administrative expenses as appropriate.

~~Derivative~~On ~~commodity~~August 12, ~~instruments~~2004, ~~accounted~~we ~~for~~issued ~~under SFAS No~~$100.0 ~~133,~~million ~~Accounting~~aggregate ~~for~~principal ~~Derivative Instruments~~amount ~~and~~of ~~Hedging~~our ~~Activities~~6.0% ~~(SFAS~~senior subordinated ~~133),~~convertible ~~are~~notes ~~subject~~due ~~to mark-to-market accounting~~August 15, ~~under which~~2014 ~~changes~~ in ~~the~~a ~~market~~private ~~value~~placement. ofThe ~~outstanding~~notes ~~commodities~~ are ~~recognized as unrealized gains or~~ ~~losses~~convertible inat the ~~consolidated~~option ~~statements~~ of ~~operations~~the orholder ~~accumulated~~under ~~other~~certain ~~comprehensive~~circumstances ~~income (AOCI) in~~into ~~the~~shares ~~period~~ of ~~change.~~our Wecommon ~~record~~stock at ~~the~~an ~~fair~~initial ~~market~~conversion ~~value~~rate of ~~our~~98.9854 ~~derivatives~~shares ~~based~~per on$1,000 ~~widely available~~principal ~~market~~amount ~~quotes,~~of asnotes ~~well~~(an asinitial conversion ~~information~~price ~~supplied~~of by$10.1025 ~~independent~~per ~~third~~share), ~~parties~~subject to adjustment.

~~During~~We have classified the ~~twenty~~6% senior subordinated convertible notes and certain capital leases which were converted to pre-~~four~~petition ~~week~~debt, ~~periods~~all ~~ending~~of ~~November 17~~which are unsecured, ~~2007~~as ~~and~~liabilities ~~November 18~~subject to compromise and, ~~2006~~in accordance with the guidance provided by SOP 90-7, weFinancial ~~did~~Reporting ~~not~~by ~~elect~~Entities toin ~~apply~~Reorganization ~~hedge~~under ~~accounting~~the ~~for~~Bankruptcy ~~any~~Code, ofwe ~~our~~have ~~derivative~~and ~~commodity~~continue ~~purchases~~to ~~and~~suspend ~~all~~the ~~such~~accrual ~~derivatives~~of ~~were~~interest ~~marked-to-market~~on this debt.

169. Derivative Instruments

~~through~~We ~~cost~~are ofexposed ~~products~~to ~~sold~~market orrisks ~~selling,~~relative ~~delivery~~to ~~and administrative~~commodity ~~expenses~~price ~~as appropriate~~fluctuations. AtTo ~~November 17, 2007,~~manage the ~~fair~~volatility associated ~~value~~with ofthis ~~our~~exposure, ~~commodity~~we ~~derivatives~~utilize ~~was~~commodity aderivative ~~gain~~instruments ofto ~~approximately~~manage ~~$0.5 million based~~certain ~~upon~~commodity ~~widely available market quotes~~prices. ~~There~~All ~~was~~financial noinstruments ~~derivative~~are ~~activity~~used insolely ~~AOCI~~ for ~~both~~hedging ~~the~~purposes ~~first~~ and ~~second~~are ~~quarters~~not issued ofor ~~fiscal~~held ~~2008~~for speculative reasons.

WeCommodities we use in the production of our products are ~~exposed~~subject to ~~credit~~wide ~~losses~~price influctuations, depending upon factors such as weather, crop production, worldwide market supply and demand and government regulation. Our objective is to utilize commodity hedging derivatives, including exchange traded futures and options on wheat, corn, soybean oil and certain fuels, to reduce our exposure to commodity price movements for future ingredient and energy needs. The strategy is to purchase futures and options to hedge the ~~event~~variability of ~~nonperformance~~cash byflows ~~counterparties~~related onto the underlying commodity. The terms of such instruments, and the hedging transactions to which they relate, ~~derivatives~~generally do not exceed one year. Our current financial condition could impede our ability to manage commodity price risk.

~~10.~~We ~~Liabilities~~enter ~~Subject~~into commodity derivatives, principally wheat, corn, soybean oil, and heating oil, in which we do not elect to ~~Compromise~~apply hedge accounting. Realized and unrealized gains or losses on these positions are recorded in the consolidated statements of operations in cost of products sold or selling, delivery and administrative expenses, as appropriate.

~~Under~~Derivative ~~bankruptcy~~commodity ~~law,~~instruments ~~actions~~accounted byfor ~~creditors~~under toSFAS ~~collect~~133, ~~amounts~~Accounting wefor ~~owe~~Derivative Instruments ~~prior~~and toHedging ~~the~~Activities ~~petition~~(SFAS ~~date~~133), are subject to mark-to-market accounting, under ~~stayed~~which ~~and~~changes ~~certain~~in ~~other~~the ~~pre-petition~~market ~~contractual~~value ~~obligations~~of ~~may~~outstanding ~~not~~commodities beare ~~enforced~~recognized ~~against~~as ~~us.~~unrealized ~~All~~gains or ~~pre-petition~~losses ~~amounts~~in ~~have~~the ~~been~~consolidated ~~classified~~statements asof ~~liabilities~~operations ~~subject~~or toaccumulated ~~compromise~~other comprehensive income (AOCI) in the ~~fiscal~~period ~~2008 and~~of ~~2007~~change. ~~consolidated~~We ~~balance~~record ~~sheets~~the ~~except~~fair ~~for~~market ~~secured~~value ~~debt~~of ~~and~~our ~~those~~derivatives ~~other~~based ~~liabilities~~on ~~that we~~widely ~~currently~~available ~~expect~~market ~~will~~quotes, ~~not~~as bewell ~~impaired~~as ~~pursuant~~information tosupplied aby ~~confirmed~~independent ~~plan~~third ~~of reorganization~~parties.

OnDuring ~~December 14, 2004,~~ the ~~Court~~twenty-four ~~entered~~weeks anended ~~Order establishing March~~November 2115, ~~2005~~2008 ~~as the last date for all persons~~ and ~~entities holding or wishing to assert bankruptcy claims against the Company or one of its subsidiaries to file a proof of claim form. As of December~~November 717, 2007, we ~~have~~did ~~received approximately~~not ~~9,200~~elect ~~claims,~~to apply ~~some~~hedge ofaccounting ~~which~~for ~~have~~any ~~been~~of ~~filed~~our ~~after~~derivative ~~the~~commodity ~~deadline~~purchases ~~established~~and ~~by the court. We continue to evaluate~~ all ~~claims~~such ~~asserted~~derivatives ~~in the bankruptcy proceedings and file periodic~~were ~~motions~~marked-to-market ~~with~~through ~~the~~cost ~~court~~of toproducts ~~reject,~~sold ~~modify, liquidate~~ or ~~allow such claims. In addition~~selling, wedelivery ~~may receive~~and ~~additional~~administrative ~~claims resulting from~~expenses, ~~among other things, the future rejection of executory~~as ~~contracts since the deadline to file a claim resulting from a contract rejection is a function of when such contracts are formally rejected~~appropriate. ~~Amounts~~At ~~that we have recorded may~~November 15, ~~in certain instances~~2008, be ~~different than amounts asserted by our creditors and remain subject to reconciliation and~~the ~~adjustment.~~

~~We received approval from the Court to pay or otherwise honor certain of our pre-petition~~15 obligations, including employee salaries and wages, benefits and certain tax and other claims. We also have suspended the accrual of interest on the unsecured 6% senior subordinated convertible notes in the aggregate principle amount of $100.0 million that we issued August 12, 2004. The cumulative contractual unrecorded interest at November 17, 2007 on these obligations was approximately $18.9 million. The unrecorded interest expense for the second quarter of both fiscal 2008 and 2007 on these obligations was approximately $1.4 million and year-to-date for both fiscal 2008 and 2007 unrecorded interest on these obligations was approximately $2.8 million. See Note 8. Debt to these condensed consolidated financial statements for a discussion of the credit arrangements we entered into subsequent to the Chapter 11 filing.

TheTable following table summarizes the components of the liabilities subject to compromise in our consolidated balance sheets: Contents

	November 17,		June 2,
	2007		2007
	(dollars in thousands)
Accounts payable	$	131,012	$	130,732
Taxes payable		4,701		5,741
Retirement obligations (SERP and deferred compensation)		15,147		15,063
Legal reserve		13,914		13,819
Interest bearing debt and capital leases		106,124		106,124
Other		23,711		19,074
	$	294,609	$	290,553

fair value of our commodity derivatives was a loss of approximately $1.7 million based upon widely available market quotes. There was no derivative activity in AOCI for the twelve or twenty-four week period ended November 15, 2008.

~~Liabilities~~We ~~subject~~are exposed to ~~compromise~~credit ~~for~~losses ~~taxes payable decreased~~ in ~~fiscal 2008 principally due to~~ the ~~adoption~~ event of ~~FIN~~nonperformance ~~48.~~by ~~The~~counterparties ~~increase~~on ~~in other liabilities subject to compromise primarily reflects the~~commodity ~~settlement of various insurance claims~~derivatives.

1710. Liabilities Subject to Compromise

11Under bankruptcy law, actions by creditors to collect amounts we owe prior to the petition date are stayed and certain other pre-petition contractual obligations may not be enforced against us. ~~Employee~~All pre-petition ~~Benefit~~amounts ~~Plans~~have been classified as liabilities subject to compromise in the fiscal 2009 and 2008 consolidated balance sheets, except for those other liabilities that we expect will not be impaired pursuant to the confirmed Plan.

~~American~~On ~~Bakers~~December 14, ~~Association~~2004, ~~Retirement~~the ~~Plan~~Court entered an Order that established March 21, 2005 as the last date for all persons and entities holding or wishing to assert bankruptcy claims against the Company or one of its subsidiaries to file a proof of claim form. As of December 10, 2008, we have received approximately 9,400 claims, some of which have been filed after the deadline established by the court. We continue to evaluate all claims asserted in the bankruptcy proceedings and file periodic motions with the court to reject, modify, liquidate or allow such claims. In addition, we may receive additional claims resulting from, among other things, the future rejection of executory contracts since the deadline to file a claim resulting from a contract rejection is a function of when such contracts are formally rejected. Amounts that we have recorded may, in certain instances, be different than amounts asserted by our creditors and remain subject to reconciliation and adjustment.

We ~~participate~~received inapproval from the ~~American~~Court ~~Bakers~~to ~~Association~~pay ~~Retirement Plan,~~ or ~~ABA~~otherwise ~~Plan,~~honor ~~and~~certain ~~believe~~of ~~that~~our pre-petition ~~the~~obligations, ~~ABA~~including ~~Plan~~employee ~~has~~salaries ~~been~~and ~~historically~~wages, ~~administered~~benefits ~~as a multiple employer plan under ERISA~~ and certain tax ~~rules~~ and ~~should~~other beclaims. ~~treated~~We also ashave ~~such.~~suspended ~~However,~~ the ~~amounts~~accrual ~~reflected~~of ininterest ~~our financial statements were calculated~~ on the ~~basis~~unsecured of6% ~~treating~~senior ~~the~~subordinated ~~ABA~~convertible notes ~~Plan~~in asthe an aggregate ofprinciple ~~single~~amount ~~employer~~of ~~plans under~~$100.0 million ~~ERISA~~that ~~and~~we ~~tax~~issued ~~rules~~August 12, ~~which~~2004. isThe cumulative ~~how~~contractual ~~the~~unrecorded ~~ABA~~interest ~~Plan~~at ~~contends~~November 15, it2008 ~~should~~on bethese ~~treated.~~obligations ~~We have~~was ~~reflected~~approximately ~~our~~$24.9 million. ~~interest~~The inunrecorded ~~the~~interest ~~ABA~~expense ~~Plan~~for asthe ansecond ~~aggregate~~quarter of ~~single~~both ~~employer~~fiscal 2009 ~~plans~~and ~~despite~~2008 ~~our position~~ on ~~the~~these ~~proper~~obligations ~~characterization~~was ofapproximately ~~the~~$1.4 million ~~ABA~~and ~~Plan due~~ year-to-date ~~representations~~for weboth ~~received from the~~fiscal ~~ABA~~2009 ~~Plan~~ and a2008 ~~1979~~unrecorded ~~determination~~interest ~~issued~~on bythese ~~the~~obligations ~~Pension~~was ~~Benefit~~approximately ~~Guaranty Corporation (PBGC) (as discussed below)~~$2. ~~As of November~~8 ~~17,~~million. ~~2007,~~See ~~our~~Note ~~net~~8. Debt ~~pension~~to ~~benefit~~these ~~obligation~~consolidated ~~liability~~financial ~~was approximately~~statements ~~$70.5 million~~for ~~representing~~a ~~our~~discussion ~~respective~~of ~~interest in~~ the ~~ABA~~credit ~~Plan,~~arrangements ~~reflecting its~~we ~~characterization~~entered asinto ansubsequent ~~aggregate~~to ofthe ~~single~~Chapter 11 ~~employer plans~~filing.

AsThe afollowing ~~result~~table ofsummarizes ~~a request made by us and~~ the ~~Kettering~~components Baking Company, another participating employer in the ABA Plan, the PBGC, which is the federal governmental agency that insures and supervises defined benefit pension plans, revisited its 1979 determination that the ABA Plan was an aggregate of ~~single employer plans and after reviewing~~ the ~~status~~liabilities ofsubject ~~the~~to ~~ABA~~compromise ~~Plan, on August 8, 2006, made a final determination that the ABA Plan is a multiple employer plan under ERISA. On August 9, 2006, we filed a lawsuit~~ in ~~Bankruptcy Court seeking enforcement of the PBGC’s determination, but there can be no assurance as to whether we will obtain such enforcement or the amount of any reduction to~~ our ~~net benefit obligation liability. Accordingly, due to the lack of a~~ ~~definitive~~consolidated ~~resolution~~balance ~~of this uncertainty prior to the end of the fiscal periods presented herein,~~sheet: ~~as noted above we have continued to reflect our interests in the ABA Plan as an aggregate of single employer plans.~~

We believe that treatment of the ABA Plan as a multiple employer plan will result in a significant reduction in our net pension benefit obligation with respect to our employee participants. The ultimate outcome of this uncertainty cannot presently be determined.


	November 15,		May 31,
	2008		2008
	*(dollars in thousands*)
Accounts payable	$	130,092	$	130,828
Taxes payable		3,408		4,637
Retirement obligations (SERP and deferred compensation)		20,200		20,200
American Bakers Association Retirement Plan obligations		78,500		—
Legal reserve		14,493		14,424
Interest bearing debt and capital leases		557,610		556,372
Other		25,428		25,031


	$	829,731	$	751,492

~~Since~~Claims ~~January 2006,~~of wethe ~~have~~senior ~~not~~secured ~~made~~lenders ~~required~~are ~~quarterly~~impaired ~~minimum~~under ~~funding contributions in~~ the ~~amount~~ terms of ~~approximately $20.8 million to~~ the ~~ABA~~ Plan. ~~and~~Due ~~have~~to ~~filed~~ the ~~necessary reports with the PBGC~~ ~~reporting~~impairment ~~such~~of ~~non-payment.~~these ~~In addition~~claims, ~~since~~amounts ~~June 2006,~~due ~~we have received notice of corrective contributions~~ under the ~~single~~Senior ~~employer~~Secured ~~plan~~Credit ~~assumption~~Facility ~~totaling~~are ~~approximately~~included ~~$14.7 million, which~~in weliabilities dosubject ~~not~~to ~~believe is correct~~compromise. WeSee ~~have~~Note ~~not made such contributions pending the resolution of the uncertainties surrounding the ABA Plan~~1. ~~However,~~Voluntary weChapter 11 ~~expect~~Filing ~~that~~to ~~the~~these ~~amount of such contributions~~consolidated ~~would~~financial bestatements ~~significantly~~for ~~less~~related ~~if the ABA Plan is a multiple employer plan than the amounts assessed by the ABA Plan on their assumption that the plan was an aggregate of single employer plans~~disclosures.

~~The~~Additionally, ~~ABA~~the ~~Plan’s~~increase ~~net benefit obligation liability is recorded~~ in ~~other~~ liabilities ~~except~~subject ~~for~~to ~~the current~~compromise ~~portion~~from ~~of $35.5~~May ~~million for both November 17~~31, ~~2007~~2008 ~~and~~primarily represents ~~June 2,~~the ~~2007,~~settlements ~~which~~associated iswith ~~recorded~~the ~~in accrued~~ABA ~~expenses~~Plan. ~~The~~See ~~current~~Note ~~portion~~11. atEmployee ~~November 17,~~Benefit ~~2007~~Plans ~~represents~~to these ~~requested~~consolidated ~~unpaid amounts at~~financial ~~that date.~~

~~The components of the pension expense for the ABA Plan as an aggregate of single employer plans are~~16 ~~as follows:~~

	Twelve Weeks Ended				Twenty-Four Weeks Ended
	November 17,		November 18,		November 17,		November 18,
	2007		2006		2007		2006
			(dollars in thousands)
Service cost	$	234	$	261	$	468	$	522
Interest cost		825		776		1,650		1,552
Expected return on negative plan assets		168		84		336		168
Net pension expense	$	1,227	$	1,121	$	2,454	$	2,242

18statements for further discussion.

~~Defined~~11. Employee Benefit ~~Pension Plan, Postretirement Health and Life~~ Plans~~, and Supplemental Executive~~ ~~Retirement Plan~~

~~Defined~~American ~~Benefit~~Bakers ~~Pension~~Association Retirement Plan

InAs ~~addition~~of toNovember 7, 2008, we withdrew all remaining active participants from the ABA Plan. Upon our withdrawal, wepresent ~~maintain~~plan abenefit obligations remained with the ABA Plan, while future benefits will be provided under the Company-sponsored defined benefit pension plan. Due to ~~benefit~~the ~~certain union~~complete curtailment, we remeasured plan assets and ~~nonunion~~obligations ~~employee~~as ~~groups~~of November 7, ~~with~~2008 ~~participation~~and ~~generally~~the ~~resulting~~following table ~~from~~reflects ~~business~~our ~~acquisitions.~~respective interest in the ABA Plan based upon that assessment assuming the ABA Plan is an aggregate of single-employer plans:

Postretirement Health and Life Plans


	November 7,			May 31,
	2008			2008
	*(dollars in thousands)*
Change in Benefit Obligation
Benefit obligation at beginning of year	$	56,823		$	60,465
Service cost		369			1,016
Interest cost		1,610			3,573
Actuarial gain		(7,430	)		(3,812	)
Benefits paid and expenses		(1,839	)		(4,117	)
Curtailment gain		(954	)		(302	)


Benefit obligation at November 7, 2008	$	48,579		$	56,823


Change in Fair Value of Negative Plan Assets
Fair value of plan assets at beginning of year	$	(12,271	)	$	(7,715	)
Actual return on plan assets		3,298			(816	)
Employer contributions		212			377
Benefits paid and expenses		(1,839	)		(4,117	)


Fair value of negative plan assets at November 7, 2008	$	(10,600	)	$	(12,271	)


Funded Status at November 7, 2008	$	(59,179	)	$	(69,094	)

InThe ~~addition~~following totable ~~providing~~provides ~~retirement~~the ~~pension~~weighted-average ~~benefits,~~assumptions weused ~~provide~~to ~~health~~determine ~~care~~projected ~~and life insurance~~benefit ~~benefits~~liability for ~~certain~~the ~~eligible~~ABA ~~retired employees.~~Plan:

Most union employees who have bargained into our company-sponsored postretirement health care and life plans are generally eligible for coverage under the plan beginning between ages 55 to 60, with 10 to 20 years of service. Most of the plans require contributions by retirees and spouses and a limited number of participants have supplemental benefits after Medicare eligibility.


	November 7,			May 31,
	2008			2008
Weighted-average actuarial assumptions
Liability discount rate		8.1	%		6.7	%
Expense discount rate (immediate recognition)		8.1	%		6.7	%
Expected return on plan assets		7.5	%		7.5	%

~~Supplemental~~We ~~Executive~~entered ~~Retirement~~into a Compromise and Settlement Agreement in October 2008 with the Pension Benefit Guaranty Corporation (PBGC) pursuant to which the parties agreed that the PBGC will be allowed a prepetition general unsecured claim in our bankruptcy in the amount of $72.5 million if, and only if, the ABA Plan is ultimately determined to be an aggregate of single-employer plans in the ongoing litigation in the District of Columbia (See Note 16. Commitments and Contingencies). Otherwise, the allowed claim will be limited to $17.5 million. This agreement was subject to Bankruptcy Court approval and consummation of the Plan. Bankruptcy Court approval was granted on November 13, 2008.

We ~~established~~entered into a ~~Supplemental~~Compromise ~~Executive~~and ~~Retirement~~Settlement ~~Plan~~Agreement ~~(SERP) effective~~dated ~~June~~December 21, ~~2002.~~2008 ~~The~~with ~~SERP provided~~the ~~retirement~~ABA ~~benefits~~Plan pursuant to ~~certain~~which ~~officers~~the ~~and~~parties ~~other~~agreed ~~select~~that ~~employees.~~the ~~The~~following ~~SERP~~ABA isPlan aclaims ~~non-tax qualified~~will ~~mechanism,~~be ~~which~~the ~~was~~only ~~intended~~allowed claims toin ~~enhance~~ our ~~ability~~bankruptcy toin ~~retain~~settlement ~~the services~~ of ~~certain employees.~~all ~~The~~claims ~~benefits were limited to a maximum~~ of ~~1.8%~~the ofparties: (1) a ~~participant’s~~prepetition ~~final average salary~~general ~~multiplied~~unsecured byclaim in the ~~years~~amount of ~~credited~~$6.0 million ~~service~~and ~~up to twenty years.~~(2)

~~Subsequent to our bankruptcy filing, we suspended the SERP as of November 11, 2004. Approximately $11.1 million representing the portion of the SERP liability, at both November~~ 17~~, 2007 and June 2,~~ ~~2007, attributable to retired participants has been reclassified to liabilities subject to compromise.~~

TheTable components of net periodic benefit cost (credit) for these plans are as follows: Contents

	Twelve Weeks Ended
	Pension						Postretirement						SERP
	November 17,			November 18,			November 17,			November 18,			November 17,			November 18,
	2007			2006			2007			2006			2007			2006
	(dollars in thousands)
Service cost	$	195		$	213		$	263		$	298		$	—		$	—
Interest cost		932			916			747			833			319			316
Expected return on plan assets		(1,290	)		(1,246	)		—			—			—			—
Amortization of prior service cost (credit)		63			63			(1,706	)		(1,706	)		—			—
Recognized net actuarial (gain) loss		—			7			191			242			(17	)		—
Net periodic benefit cost (credit)	$	(100	)	$	(47	)	$	(505	)	$	(333	)	$	302		$	316

an administrative expense claim in the amount of $0.8 million. This agreement was subject to Bankruptcy Court approval, which was granted on December 1, 2008.

19Based upon these settlements, which grant claims totaling $79.3 million for the full settlement of the ABA Plan on an aggregate of single-employer plan basis, the Company recorded a reorganization charge in the second quarter of fiscal 2009 of $20.1 million to reflect the ABA Plan liability on the balance sheet at the full amount of the claim settlements. Based upon the terms of the agreements, the liability has been reflected in the November 15, 2008 balance sheet as follows (in thousands):

	Twenty-Four Weeks Ended
	November 15,
	Pension						Postretirement						SERP
	2008
	November 17,			November 18,			November 17,			November 18,			November 17,			November 18,
Accrued liabilities	$	800
	2007			2006			2007			2006			2007			2006
Liabilities subject to compromise		78,500
	(dollars in thousands)
Total liability recorded for claim settlements related to the ABA Plan	$	79,300
Service cost	$	390		$	426		$	526		$	596		$	—		$	—
Interest cost		1,864			1,832			1,493			1,666			638			632
Expected return on plan assets		(2,580	)		(2,492	)		—			—			—			—
Amortization of prior service cost (credit)		126			126			(3,411	)		(3,412	)		—			—
Recognized net actuarial (gain) loss		—			14			382			484			(34	)		—
Net periodic benefit cost (credit)	$	(200	)	$	(94	)	$	(1,010	)	$	(666	)	$	604		$	632

~~12.~~The ~~Stock~~components of the pension (credit) expense for the ABA Plan based on an aggregate of single-~~Based~~employer ~~Compensation~~plans basis, reflecting the remeasurement due to the plan curtailment, are as follows:

Effective June 4, 2006, we adopted the provisions of SFAS No. 123R, Share-Based Payment (SFAS 123R), which amended SFAS No. 123, Accounting for Stock-Based Compensation, and superseded Accounting Principles Board Opinion (APB Opinion) No. 25, Accounting for Stock Issued to Employees (APB Opinion 25), which generally requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value and to recognize the cost over the requisite service period. Prior to the adoption of SFAS 123R, we used the intrinsic value method prescribed in APB Opinion 25, and related interpretations in accounting for our 1996 Stock Incentive Plan, and therefore, no compensation expense was recognized for stock options issued under the Plan.


	Twelve Weeks Ended					Twenty-Four Weeks Ended
	November 15,			November 17,		November 15,			November 17,
	2008			2007		2008			2007
	(dollars in thousands)
Service cost	$	169		$	234	$	369		$	468
Interest cost		758			825		1,610			1,650
Expected return on negative plan assets		223			168		475			336
Recognition of actuarial gain		(11,204	)		—		(11,204	)		—


Total pension (credit) expense		(10,054	)		1,227		(8,750	)		2,454
Curtailment gain recognized (1)		(50	)		—		(50	)		—


Net pension (credit) expense recognized	$	(10,104	)	$	1,227	$	(8,800	)	$	2,454

We(1) ~~adopted~~Due ~~SFAS~~to ~~123R~~the ~~using~~complete curtailment of the ~~modified~~ABA ~~prospective~~Plan, ~~method.~~we ~~The~~realized ~~cumulative~~a ~~impact~~curtailment gain of ~~adopting~~$0.9 ~~SFAS 123R~~million onfor the ~~unvested~~ABA ~~equity-based~~Plan. ~~awards~~However, ~~which~~due ~~were~~to service time credit granted ~~prior~~in tothe ~~2007~~successor plan as well as out-of-plan replacement benefits granted, a significant portion of this gain was ~~inconsequential~~reflected ~~to the~~as ~~consolidated~~non-ABA ~~statement~~Plan ofbenefit ~~operations~~obligations which are included in other liabilities at November 15, 2008.

~~1996~~Defined ~~Stock~~Benefit ~~Incentive~~Pension Plan, Postretirement Health and Life Plans, and Supplemental Executive Retirement Plan

~~The~~Defined ~~1996~~Benefit ~~Stock~~Pension ~~Incentive~~ Plan ~~(the Plan) allows us to grant to employees and directors various~~ stock awards including stock options, which are granted at prices not less than the fair market value at the date of grant, and restricted and deferred shares. A maximum of approximately 18.7 million shares was approved by our stockholders to be issued under the Plan. On November 17, 2007, shares totaling approximately 9.7 million were authorized but not awarded under the Plan. The stock options may be granted for a period not to exceed ten years and generally vest from one to three years from the date of grant. Our current practice is to settle awards out of treasury stock.

AnWe ~~analysis~~maintain ofa ~~our~~defined ~~stock~~benefit ~~option~~pension ~~activity~~plan isto asbenefit ~~follows:~~certain union and nonunion employee groups.

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise Price		Contractual		Aggregate
	Shares			Per Share		Term		Intrinsic Value
								(dollars in
	(in thousands)							thousands)
Outstanding, as of June 2, 2007		3,264		$	15.69		4.2	$	23,280
Granted		—			—
Surrendered		(445	)		23.29
Exercised		—			—
Outstanding, as of November 17, 2007		2,819		$	14.49		4.0	$	19,106
Exercisable at November 17, 2007		2,819		$	14.49		4.0	$	19,106

Postretirement Health and Life Plans

20In addition to providing retirement pension benefits, we provide health care and life insurance benefits for certain eligible retired employees.

~~There~~Most ~~were~~union noemployees ~~stock~~who ~~options~~have ~~granted~~bargained orinto ~~exercised~~our incompany-sponsored ~~both~~postretirement ~~the~~health ~~first~~care and ~~second quarters of fiscal~~ ~~2008~~life ~~and 2007.~~plans

~~On January 23, 2004, we exchanged outstanding options to purchase shares of our common stock with~~18 exercise prices of $25.00 or greater held by certain eligible employees for shares of restricted stock. The offer resulted in the exchange of options representing the right to purchase an aggregate of approximately 3.5 million shares of our common stock for approximately 0.5 million shares of restricted stock. The restricted stock, which vests ratably over a four-year term, was granted, and the eligible options were granted, under the Plan. We used approximately 0.5 million shares of treasury stock for the award and recorded approximately $7.4 million of unearned compensation as a reduction to stockholders’ equity. The unearned compensation expense is being charged over the vesting period, with approximately $0.3 million in the second quarter for both fiscal 2008 and 2007 and $0.5 million and $0.4 million year-to-date for fiscal 2008 and 2007, respectively.

TheTable tableof below summarizes the nonvested restricted stock transactions: Contents

				Weighted
				Average
				Grant Date
	Shares			Fair Value
	(in thousands)
Nonvested, as of June 2, 2007		73		$	14.46
Granted		—			—
Vested		(2	)		14.80
Surrendered		(8	)		11.76
Nonvested, as of November 17, 2007		63		$	14.80

are generally eligible for coverage under the plan beginning between ages 55 to 60, with 10 to 20 years of service. Most of the plans require contributions by retirees and spouses and a limited number of participants have supplemental benefits after Medicare eligibility.

~~The~~Supplemental ~~total~~Executive ~~compensation~~Retirement ~~cost related to nonvested restricted stock awards not yet recognized as of~~Plan ~~November 17, 2007 was approximately $0.2 million and is expected to be fully amortized by the end of the third quarter of fiscal 2008.~~

OnWe ~~November~~established a Supplemental Executive Retirement Plan (SERP) ~~17,~~effective ~~2007~~June 2, ~~approximately~~2002. 12The SERP provided retirement benefits to certain officers and other select employees.~~7 million~~ ~~total~~The ~~shares~~SERP is a non-tax qualified mechanism, which was intended to enhance our ability to retain the services of ~~common~~certain employees. ~~stock~~The benefits were ~~reserved~~limited ~~for~~to a maximum of 1.8% of a participant’s final average salary ~~issuance~~multiplied ~~under~~by ~~various~~the ~~employee~~years ~~benefit~~of ~~plans~~credited service up to twenty years.

13We suspended the SERP as of November 11, 2004. ~~Restructuring~~Approximately ~~Charges~~$12.1 million ~~(Credits)~~representing the portion of the SERP liability, at both November 15, 2008 and May 31, 2008, attributable to retired participants has been classified to liabilities subject to compromise. Pursuant to the terms of the Plan, on the effective date the SERP will be terminated.

The components of ~~restructuring~~net ~~charges~~periodic benefit cost (~~credits~~credit) for these plans are as follows:

	Twelve Weeks Ended						~~Twenty-Four Weeks Ended~~
	November 17,			November 18,			November 17,			November 18,
	Pension						Postretirement						SERP
	2007			2006			2007			2006
	November			November			November			November			November			November
	(dollars in thousands)
	15,			17,			15,			17,			15,			17,
Severance charges	$	7,651		$	67		$	7,595		$	296
	2008			2007			2008			2007			2008			2007
Long-lived asset credits		(395	)		(4,787	)		(493	)		(5,195	)
	(dollars in thousands)
Other exit costs		673			527			779			1,235
Service cost	$	197		$	195		$	200		$	263		$	—		$	—
Total	$	7,929		$	(4,193	)	$	7,881		$	(3,664	)
Interest cost		988			932			605			747			341			319
Expected return on plan assets		(1,212	)		(1,290	)		—			—			—			—
Amortization of prior service cost (credit)		76			63			(1,599	)		(1,706	)		—			—
Recognized net actuarial (gain) loss		—			—			—			191			(116	)		(17	)
Net periodic benefit cost (credit)	$	49		$	(100	)	$	(794	)	$	(505	)	$	225		$	302

Fiscal 2008 Activity


	Twenty-Four Weeks Ended
	Pension						Postretirement						SERP
	November			November			November			November			November			November
	15,			17,			15,			17,			15,			17,
	2008			2007			2008			2007			2008			2007
	*(dollars in thousands)*
Service cost	$	394		$	390		$	400		$	526		$	—		$	—
Interest cost		1,976			1,864			1,210			1,493			682			638
Expected return on plan assets		(2,424	)		(2,580	)		—			—			—			—
Amortization of prior service cost (credit)		152			126			(3,198	)		(3,411	)		—			—
Recognized net actuarial (gain) loss		—			—			—			382			(232	)		(34	)


Net periodic benefit cost (credit)	$	98		$	(200	)	$	(1,588	)	$	(1,010	)	$	450		$	604

~~There were two new restructuring plans approved in the second quarter of fiscal 2008~~12. ~~First,~~Stock-Based weCompensation exited the bread market in Southern California. This entailed closing four bakeries and the consolidation of routes and distribution centers. The four bakeries were closed October 20, 2007. Also we initiated a sales reorganization to improve the structure and efficiency of the sales and route delivery of our baked goods.

21Effective June 4, 2006, we adopted the provisions of SFAS No. 123R, Share-Based Payment (SFAS 123R), which amended SFAS No. 123, Accounting for Stock-Based Compensation, and superseded Accounting Principles Board Opinion (APB Opinion) No. 25, Accounting for Stock Issued to Employees (APB Opinion 25), which generally

~~In the~~19 second quarter of fiscal 2008, we eliminated approximately 1,200 employee positions and recognized severance and related benefit costs of approximately $5.7 million related to closing the bakery facilities, depots and routes in Southern California. Additionally, we incurred other exit costs of approximately $0.3 million principally for security related to the closed facilities.

RelatedTable to our sales reorganization activities, in the second quarter of fiscal 2008 we eliminated approximately 200 sales management positions for which we incurred costs for severance and benefit costs of $1.1 million and employee relocation expense of approximately $0.3 million. Contents

Inrequires public companies to measure the ~~second~~cost ~~quarter~~of employee services received in exchange for an award of ~~fiscal~~equity ~~2008,~~instruments webased ~~accrued~~on ~~additional~~the ~~employee~~grant-~~related~~date ~~charges~~fair ~~aggregating approximately~~value ~~$0.8 million~~and into ~~connection~~recognize ~~with~~the ~~our~~cost ~~fiscal~~over ~~2006~~the requisite ~~profit~~service ~~center review~~period. ~~Also~~Prior to the adoption of SFAS 123R, we ~~realized~~ aused ~~gain~~the onintrinsic ~~sale~~value ofmethod prescribed ~~assets~~in ofAPB ~~approximately~~Opinion ~~$0.5 million~~25, and ~~additional~~related ~~expense~~interpretations in accounting for our 1996 Stock ~~utilities~~Incentive Plan, ~~security~~ and ~~clean~~therefore, upno ofcompensation ~~approximately~~expense ~~$0.2 million~~was ~~related~~recognized tofor ~~our~~stock ~~fiscal~~options ~~2005 profit~~issued ~~center~~under ~~review~~the Plan.

~~These~~We ~~costs~~adopted ~~incurred~~SFAS in123R using the ~~second~~modified ~~quarter~~prospective ofmethod. ~~fiscal~~The ~~2008~~cumulative ~~were~~impact ~~generally~~of ~~consistent~~adopting ~~with~~SFAS 123R on the ~~fiscal 2008 year~~unvested equity-based awards, which were granted prior to~~-date~~ ~~restructuring~~2007, ~~charges~~was ~~incurred~~inconsequential to the consolidated statement of operations.

~~The~~1996 ~~fiscal~~Stock ~~2008 year-to-date~~Incentive ~~analysis of our restructuring costs activity is as follows:~~Plan

	Severance			Long-Lived
	and Related			Asset
	Benefits			Charges
	(Charges)			(Credits)			Other			Total
	(dollars in thousands)
Fiscal 2005 Consolidation & RIF Plan
Balance June 2, 2007	$	10		$	—		$	—		$	10
Expensed in Fiscal 2008		—			—			—		—
Cash Paid in Fiscal 2008		—			—			—		—
Noncash Utilization in 2008		(10	)		—			—			(10	)
Balance November 17, 2007		—			—			—		—
Fiscal 2005 Profit Center Review Plan
Balance June 2, 2007		4			—			—			4
Expensed in Fiscal 2008		—			(493	)		167			(326	)
Cash Paid in Fiscal 2008		—			—			(167	)		(167	)
Noncash Utilization in 2008		(4	)		493			—			489
Balance November 17, 2007		—			—			—		—
Fiscal 2006 Profit Center Review Plan
Balance June 2, 2007		60			—			—			60
Expensed in Fiscal 2008		761			—			17			778
Cash Paid in Fiscal 2008		(10	)		—			(17	)		(27	)
Noncash Utilization in 2008		(811	)		—			—			(811	)
Balance November 17, 2007		—			—			—		—
Accounting Office Closings
Balance June 2, 2007		43			—			9			52
Expensed in Fiscal 2008		(25	)		—			—			(25	)
Cash Paid in Fiscal 2008		(23	)		—			—			(23	)
Noncash Utilization in 2008		5			—			(9	)		(4	)
Balance November 17, 2007		—			—			—		—

The 1996 Stock Incentive Plan (the Stock Plan) allows us to grant to employees and directors various stock awards including stock options, which are granted at prices not less than the fair market value at the date of grant, and restricted and deferred shares. A maximum of approximately 18.7 million shares was approved by our stockholders to be issued under the Stock Plan. On November 15, 2008, shares totaling approximately 10.1 million were authorized but not awarded under the Stock Plan. The stock options may be granted for a period not to exceed ten years and generally vest from one to three years from the date of grant.

22An analysis of our stock option activity is as follows:

	Severance			Long-Lived
				Weighted			Weighted
	and Related			Asset
				Average			Average
	Benefits			Charges
				Exercise Price			Remaining
	(Charges)			(Credits)			Other			Total
	Shares			Per Share			Contractual Term
	(dollars in thousands)
	(in thousands)
FY 2008 Southern California
Outstanding, as of May 31, 2008		2,560		$	14.61			3.4
Balance June 2, 2007		—			—			—		—
Granted		—			—
Expensed in Fiscal 2008		5,756			—			280			6,036
Surrendered		(182	)		18.56
Cash Paid in Fiscal 2008		(3,300	)		—			(280	)		(3,580	)
Exercised		—			—
Noncash Utilization in 2008		—			—			—		—
Outstanding, as of November 15, 2008		2,378			14.30			3.1
Balance November 17, 2007		2,456			—			—			2,456
Exercisable at November 15, 2008		2,378			14.30			3.1
FY 2008 Sales Reorganization
Balance June 2, 2007		—			—			—		—
Expensed in Fiscal 2008		1,103			—			315			1,418
Cash Paid in Fiscal 2008		(280	)		—			(1	)		(281	)
Noncash Utilization in 2008		—			—			—		—
Balance November 17, 2007		823			—			314			1,137
Consolidated
Balance June 2, 2007		117			—			9			126
Expensed in Fiscal 2008		7,595			(493	)		779			7,881
Cash Paid in Fiscal 2008		(3,613	)		—			(465	)		(4,078	)
Noncash Utilization in 2008		(820	)		493			(9	)		(336	)
Balance November 17, 2007	$	3,279		$	—		$	314		$	3,593

~~Fiscal~~There ~~2007~~were ~~Activity~~no stock options granted or exercised in the first and second quarters of both fiscal 2009 and 2008. The exercisable stock options have no aggregate intrinsic value at November 15, 2008.

InOn ~~the~~November 15, ~~second~~2008, ~~quarter~~approximately ~~fiscal~~12.7 million ~~2007,~~total weshares ~~continued~~of ~~with~~common ~~our~~stock ~~restructuring~~were ~~activities~~reserved ~~and incurred~~for ~~severance~~issuance ~~charges~~under ofemployee ~~approximately~~benefit $0plans.~~1 million~~ ~~related~~However, pursuant to the ~~consolidation~~terms ~~and closing~~ of ~~one additional~~the ~~accounting~~Plan, ~~office.~~all ~~Year-to-date fiscal 2007 severance charges related to accounting~~existing ~~office~~equity ~~closings~~interests ~~were~~will ~~approximately~~be ~~$0.3 million~~cancelled ~~and~~as ~~a total~~ of ~~two~~the ~~accounting~~effective ~~offices~~date ~~were~~of ~~closed~~the Plan.

As part of our ongoing efforts initiated in fiscal 2006 to consolidate operations to achieve production efficiencies, we realized a net restructuring credit in the second quarter fiscal 2007 of approximately $413.~~5 million,~~ ~~comprised~~Restructuring ~~primarily~~Charges ~~of a gain on the sale of real property of $4.7~~(Credits) million, partially offset by additional miscellaneous exit costs of $0.2 million for relocation, taxes, security, utilities and clean up charges. In year-to-date fiscal 2007, we realized a net restructuring credit of approximately $4.6 million related to the fiscal 2006 consolidation efforts, comprised primarily of a gain on the sale of real property and equipment of $5.0 million, partially offset by additional miscellaneous exit costs of $0.4 million.

WeThe ~~also~~components ~~experienced additional exit charges in the second quarter fiscal 2007~~ of ~~$0.1 million, primarily~~restructuring ~~due to taxes, security, utilities and clean up efforts, which were associated with the fiscal 2005 consolidation and company-wide reduction in force~~ (~~RIF~~credits) ~~plan. Fiscal 2007 year-to-date additional exit~~ charges ~~associated~~are ~~with~~as ~~the fiscal 2005 consolidation and company-wide RIF plan~~follows: ~~were $0.2 million.~~

During the second quarter fiscal 2007, we recorded restructuring costs related to the Profit Center restructuring plan that was initiated in the fourth quarter of fiscal 2005 to consolidate production, delivery routes, depots and bakery outlets. The $0.2 million net restructuring charges related to this plan were comprised of $0.3 million in other exit costs related to relocation, taxes, security, utilities and clean up and $0.3 million additional impairment charges to adjust real property and equipment to fair value, partially offset by a $0.4 million gain on the sale of real property. Year-to-date fiscal 2007 restructuring costs related to the PC restructuring plan initiated in fourth quarter fiscal 2005 were $0.5 million, comprised of $0.7 million in other exit costs and $1.1 million in additional impairment charges, partially offset by a net gain on the sale of real property of $1.3 million.


	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 15,			November 17,			November 15,			November 17,
	2008			2007			2008			2007
	(dollars in thousands)
Severance (credits) charges	$	(8	)	$	7,651		$	(28	)	$	7,595
Long-lived asset (credits) charges		(2,148	)		(395	)		(6,923	)		(493	)
Other exit costs		378			673			772			779


Total	$	(1,778	)	$	7,929		$	(6,179	)	$	7,881

2320

CumulativeTable restructuringof (credits) charges by plan (in thousands): Contents

			Long-Lived
	Severance		Asset
	and Related		Charges
	Benefits		(Credits)			Other			Total
Fiscal 2005 Consolidation & RIF Plan	$	5,583	$	6,473		$	2,812		$	14,868
Fiscal 2005 Profit Center Review Plan		6,865		18,796			(3,917	)		21,744
Fiscal 2006 Profit Center Review Plan		6,684		(20,620	)		3,662			(10,274	)
Accounting Office Closings		479		—			55			534
Fiscal 2008 Southern California		5,756		—			280			6,036
FY 2008 Sales Reorganization		1,103		—			315			1,418

Fiscal 2009 Activity

~~Expected~~There ~~remaining~~were ~~restructuring~~no ~~charges~~new byrestructuring ~~plan~~plans (approved in ~~thousands):~~the first or second quarters of fiscal 2009.

			Long-Lived
	Severance		Asset
	and Related		Charges
	Benefits		(Credits)		Other		Total
Fiscal 2008 Southern California	$	—	$	—	$	2,550	$	2,550

We recognized credits for the expiration of severance obligations in the second quarter of fiscal 2009 of approximately $7,000 for the Southern California plan. Also in the second quarter of fiscal 2009, we realized gains totaling approximately $2.2 million on sales of certain of our Southern California properties that were formerly classified as held for sale and recognized a loss on abandonment of assets of approximately $29,000.

14We continue to incur ongoing expenses related to our Southern California properties that remains classified as held for sale. ~~Reorganization~~During ~~Charges~~the second quarter of fiscal 2009, we incurred approximately $0.4 million principally related to security, utilities, taxes and cleanup costs.

~~The~~Year-to-date ~~components~~in fiscal 2009, we realized net gains totaling approximately $6.9 million on sales of certain ~~reorganization~~of ~~charges~~our ~~are~~Southern California properties that were formerly classified as ~~follows:~~held for sale. We also incurred approximately $0.8 million principally related to security, utilities, taxes and cleanup costs.

	November 17, 2007
	Twelve Weeks			Twenty-Four Weeks
	Ended			Ended
	Reorganization			Reorganization			Cash
	Charges			Charges			Payments
	(dollars in thousands)
Professional fees	$	12,404		$	19,954		$	15,215
Employee retention expenses (credits)		—			(151	)		259
Lease rejection charges		123			266			—
Interest income		(639	)		(983	)		(774	)
Gain on sale of assets		(181	)		(181	)		(181	)
Reorganization charges, net	$	11,707		$	18,905		$	14,519

The fiscal 2009 year-to-date restructuring cost activities are as follows:


				Long-Lived
	Severance			Asset
	and Related			Charges
	Benefits			(Credits)			Other			Total
	*(dollars in thousands)*
Fiscal 2008 Southern California

Balance May 31, 2008	$	299		$	—		$	—		$	299

Expensed in Fiscal 2009		(16	)		(6,923	)		793			(6,146	)
Cash Paid in Fiscal 2009		(60	)		—			(793	)		(853	)
Noncash Utilization in 2009		—			6,923			—			6,923

Balance November 15, 2008		223			—			—			223


Fiscal 2008 Sales Reorganization

Balance May 31, 2008		40			—			120			160

Expensed in Fiscal 2009		(12	)		—			(21	)		(33	)
Cash Paid in Fiscal 2009		(28	)		—			(23	)		(51	)
Noncash Utilization in 2009		—			—			—			—

Balance November 15, 2008		—			—			76			76


Consolidated

Balance May 31, 2008		339			—			120			459

Expensed in Fiscal 2009		(28	)		(6,923	)		772			(6,179	)
Cash Paid in Fiscal 2009		(88	)		—			(816	)		(904	)
Noncash Utilization in 2009		—			6,923			—			6,923

Balance November 15, 2008	$	223		$	—		$	76		$	299

	November 18, 2006
	Twelve Weeks			Twenty-Four Weeks
	Ended			Ended
	Reorganization			Reorganization			Cash
	Charges			Charges			Payments
	(dollars in thousands)
Professional fees	$	10,522		$	18,455		$	18,125
Employee retention expenses		350			700			—
Lease rejection charges		15			98			—
Interest income		(562	)		(1,721	)		(2,600	)
Gain on sale of assets		(273	)		(825	)		(825	)
Reorganization charges, net	$	10,052		$	16,707		$	14,700

Fiscal 2008 Activity

15There were two new restructuring plans approved in the second quarter of fiscal 2008. ~~Income~~First, ~~Taxes~~we exited the bread market in Southern California. This entailed closing four bakeries and the consolidation of routes and distribution centers. The four bakeries were closed October 20, 2007. Also we initiated a sales reorganization to improve the structure and efficiency for the sales and route delivery of our baked goods.

~~The reconciliation of the provision for income taxes to the statutory federal rate is as follows:~~21

	Twenty-Four Weeks Ended
	November 17,			November 18,
	2007			2006
Statutory federal tax rate		35.0	%		35.0	%
State income tax, net		2.6			1.1
Valuation allowance increase		(29.9	)		(31.6	)
Other		(2.3	)		(1.4	)
		5.4	%		3.1	%

~~The~~In ~~income~~the ~~tax~~second ~~benefit~~quarter weof ~~have~~fiscal ~~recognized in~~ 2008, ~~relates~~we ~~principally~~recognized toseverance ~~expected~~costs ~~refunds~~ of ~~tax~~approximately we previously paid, available to us pursuant to a federal statutory provision that permits certain net operating losses to be carried back ten years, including a related reduction to our valuation allowance by $25.07 million ~~due to a change in circumstances causing a change in judgment about our~~ ~~ability~~related to ~~realize~~closing the ~~value~~bakery offacilities, ~~our~~depots ~~deferred~~and ~~tax~~routes ~~assets originating~~ in ~~prior~~Southern ~~years~~California. ~~Only a portion~~Additionally, ~~of the net operating loss~~ we ~~incur~~incurred isapproximately ~~eligible for this treatment~~$0.3 million ~~Our~~principally ~~effective tax rate~~ for ~~fiscal~~ ~~2008~~security isrelated ~~based, in large part, upon our estimate of the amount of our fiscal 2008 loss which we expect~~ to ~~be eligible for~~ the ~~ten-year~~closed ~~carryback~~facilities. ~~Our tax provision for fiscal 2007 also~~ ~~reflects the impact of the ten-year carryback.~~

WeIn ~~provide~~the asecond ~~valuation~~quarter ~~allowance~~of ~~against~~fiscal ~~deferred tax assets if~~2008, ~~based~~we onincurred ~~management’s~~costs ~~assessment of~~for ~~operating~~severance ~~results~~ and ~~other~~employee ~~available~~relocation expense ~~evidence, it is more likely than not that some or all~~ of ~~the~~ ~~deferred~~approximately ~~tax~~$1.1 million ~~assets~~and ~~will not be realized~~$0.3 million, ~~Valuation~~respectively, ~~allowances~~related ~~were~~to ~~recorded~~our ~~in fiscal 2008 and~~sales ~~2007~~reorganization ~~against deferred tax assets originating in those periods~~activities.

~~We adopted the provisions of FIN 48 on June 3, 2007.~~ In ~~accordance with~~ the ~~recognition~~second ~~standards established~~quarter byof ~~FIN~~fiscal 482008, we ~~performed~~were anotified ~~comprehensive~~that ~~review~~a ofpension ~~potential~~plan ~~uncertain~~withdrawal ~~tax~~liability ~~positions in~~was ~~each~~incurred ~~jurisdiction~~aggregating inapproximately ~~which we operate~~$0.8 million Asin aconnection ~~result~~with of our ~~review,~~fiscal we2006 ~~adjusted~~profit ~~the carrying amount~~center ~~of the liability for unrecognized tax benefits resulting in an increase to stockholders’ accumulated deficit of $3~~review.~~6 million.~~ ~~Upon adoption~~Also, we ~~recorded~~realized ana ~~increase~~gain toon ~~other~~the ~~long-term liabilities~~sale of ~~$2.9 million, a reduction to other current~~ assets of approximately $10.75 million, and ~~a reduction~~ toadditional ~~liabilities~~expense ~~subject~~for toutilities, ~~compromise~~security ofand ~~$1.0 million.~~clean ~~Our~~up ~~valuation~~of ~~allowance~~approximately ~~against deferred tax assets includes~~ $30.72 million ~~and~~related ~~$4.8 million relating~~ to ~~unrecognized tax benefits as of November~~ ~~17,~~our ~~2007~~fiscal ~~and~~2005 ~~June 3,~~profit ~~2007,~~center ~~respectively~~review.

~~Our~~These ~~total~~costs ~~liability~~incurred ~~for~~in ~~unrecognized~~the ~~tax~~second ~~benefits,~~quarter ~~including interest and penalties, is $10.6 million for both November 17, 2007 and June 3, 2007. The portion~~ of ~~these~~fiscal ~~balances~~2008 ~~which~~were ~~will~~generally ~~favorably~~consistent ~~impact~~with the ~~effective~~fiscal ~~tax~~2008 year-to-date ~~rate,~~restructuring ifcharges ~~recognized, is $10~~incurred.~~6 million.~~

25Cumulative restructuring (credits) charges by plan (in thousands):

We recognize accrued interest and penalties related to uncertain tax positions in income tax expense. As of November 17, 2007 and June 3, 2007, the total amount of accrued income tax-related interest and penalties included in the consolidated balance sheet was $0.6 million and $0.4 million, respectively.


			Long-Lived
	Severance		Asset
	and Related		Charges
	Benefits		(Credits)			Other		Total
Fiscal 2008 Southern California	$	5,332	$	(9,942	)	$	2,287	$	(2,323	)

Fiscal 2008 Sales Reorganization		1,086		—			331		1,417

~~Our~~We ~~U.S.~~expect ~~federal~~to ~~income~~incur ~~tax~~future ~~returns~~other ~~have~~restructuring ~~been~~charges ~~examined~~for by the ~~Internal Revenue Service through~~ fiscal ~~2005.~~2008 ~~With~~Southern ~~limited~~California ~~exception, in accordance with bankruptcy law, we believe that any audits~~plan oftotaling ~~our~~approximately ~~state income tax returns for years prior to fiscal 2007 would not result in additional liabilities to us~~$1. ~~We have various income tax returns in the process of examination or administrative appeal~~7 million. ToThis ~~the extent that these matters conclude, it is reasonably possible that the~~ amount ofexcludes ~~our~~gains ~~unrecognized~~expected ~~tax~~to ~~benefits~~be ~~will~~realized ~~increase or decrease. However, we do not currently~~on ~~expect~~subsequent ~~resolution~~sales of ~~these~~property ~~matters~~and ~~to result in significant changes during the next twelve months~~equipment.

1614. ~~Commitments~~Reorganization ~~and Contingencies~~Charges

OnThe ~~September 22,~~components ~~2004, or the Petition Date, we and each~~ of ~~our~~reorganization ~~wholly-owned~~charges subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, or the Bankruptcy Code, in the United States Bankruptcy Court for the Western District of Missouri, or the Bankruptcy Court (Case Nos. 04-45814, 04-45816, 04-45817, 04-45818, 04-45819,04-45820, 04-45821 and 04-45822). On September 24, 2004, the official committee of unsecured creditors was appointed in our Chapter 11 cases. Subsequently, on November 29, 2004, the official committee of equity security holders was appointed in our Chapter 11 cases. On January 14, 2006, Mrs. Cubbison’s, a subsidiary of which we are ~~an eighty percent owner, filed a voluntary petition for relief under the Bankruptcy Code in the Bankruptcy Court (Case No. 06-40111). We are continuing to operate our business~~ as afollows: debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. As a result of the filing, our pre-petition obligations, including obligations under debt instruments, may not be generally enforceable against us and any actions to collect pre-petition indebtedness and most legal proceedings are automatically stayed, unless the stay is lifted by the Bankruptcy Court.

On August 12, 2004, we issued $100.0 million aggregate principal amount of our 6.0% senior subordinated convertible notes due August 15, 2014 in a private placement to six institutional accredited investors under an exemption from registration pursuant to Rule 506 of Regulation D promulgated by the SEC. The convertible notes were purchased by Highbridge International LLC, Isotope Limited, AG Domestic Convertibles LP, AG Offshore Convertibles LTD, Shepherd Investments International, Ltd., and Stark Trading. Between the dates of September 2 and September 21, 2004, we received written correspondence from all of the initial purchasers of the convertible notes stating that it was their position that we had made certain misrepresentations in connection with the sale of the notes. No legal action has been filed by any of the purchasers with regard to their claims and we will aggressively defend any such action in the event it is filed. On December 6, 2004, U.S. Bank National Association, as indenture trustee, filed proofs of claim in our bankruptcy case on behalf of the note holders in the amount of $100.7 million, plus any other amounts owing pursuant to the terms of the indenture and reimbursement of the trustee’s fees and expenses. In addition, on March 18, 2005, R2 Investments, LDC filed a proof of claim in the amount of $70.4 million plus interest, fees and expenses based on its holdings of 70% of the notes, which were acquired through secondary trading.


	November 15, 2008
	Twelve Weeks			Twenty-Four Weeks
	Ended			Ended
	Reorganization			Reorganization			Cash
	Charges			Charges			Payments
	*(dollars in thousands)*
Professional fees	$	14,275		$	20,677		$	16,852
Employee retention (credits) charges		(36	)		(189	)		23
Lease rejection credits		(210	)		(207	)		—
Interest income		(41	)		(64	)		—
Gain on sale of assets		(26	)		(229	)		(229	)
ABA Plan settlement (See Note 11. Employee Benefit Plans)		20,121			20,121			—


Reorganization charges, net	$	34,083		$	40,109		$	16,646

~~In June 2003, a purported shareholder derivative lawsuit was filed in Missouri state court against~~22 certain current and former officers and directors of IBC, seeking damages and other relief. In the case, which is captioned Miller v. Coffey, et al., No. 03-CV-216141 (Cir. Ct., Jackson Cty.), plaintiffs allege that the defendants in this action breached their fiduciary duties to IBC by using material non-public information about IBC to sell IBC stock at prices higher than they could have obtained had the market been aware of the material non-public information. Our Board of Directors previously had received a shareholder derivative demand from the plaintiffs in the June 2003 derivative lawsuit, requesting legal action by us against certain officers and directors of IBC. In response, our Board of Directors appointed a Special Review Committee to evaluate the demand and to report to the board. Prior to our Chapter 11 filing, the parties had agreed to stay the lawsuit until October 11, 2004 and also had initiated preliminary discussions looking towards the possibility of resolving the matter. On November 26, 2007, the circuit court dismissed the lawsuit without prejudice pursuant to local court rules.

26 Table of Contents

We are named in two wage and hour cases in New Jersey that have been brought under state law, one of which has been brought on behalf of a putative class of Route Sales Representatives. The case involving the putative class is captioned Ruzicka, et al. v. Interstate Brands Corp., et al., No. 03-CV 2846 (FLW) (Sup. Ct., Ocean City, N.J.), and the other case is captioned McCourt, etal. v. Interstate Brands Corp., No. 1-03-CV-00220 (FLW) (D.N.J.). These cases are in their preliminary stages. As a result of our Chapter 11 filing, these cases have been automatically stayed. The named plaintiffs in both cases have filed a proof of claim in our bankruptcy case for unpaid wages. We intend to vigorously contest these lawsuits.


	November 17, 2007
	Twelve Weeks			Twenty-Four Weeks
	Ended			Ended
	Reorganization			Reorganization			Cash
	Charges			Charges			Payments
	*(dollars in thousands)*
Professional fees	$	12,404		$	19,954		$	15,215
Employee retention (credits) charges		—			(151	)		259
Lease rejection charges		123			266			—
Interest income		(639	)		(983	)		(774	)
Gain on sale of assets		(181	)		(181	)		(181	)


Reorganization charges, net	$	11,707		$	18,905		$	14,519

~~The EPA has made inquiries into the refrigerant handling practices of companies in our industry~~15. ~~In September 2000,~~Income ~~we received a request for information from the EPA relating to our handling of~~Taxes regulated refrigerants, which we historically have used in equipment in our bakeries for a number of purposes, including to cool the dough during the production process. The EPA has entered into negotiated settlements with two companies in our industry, and has offered a partnership program to other members of the bakery industry that offered amnesty from fines if participating companies converted their equipment to eliminate the use of ozone-depleting substances. Because we had previously received an information request from the EPA, the EPA/Department of Justice (DOJ) policies indicated that we were not eligible to participate in the partnership program. Nevertheless, we undertook our own voluntary program to convert our industrial equipment to reduce the use of ozone-depleting refrigerants. Prior to our Chapter 11 filing, we had undertaken negotiations with the EPA to resolve issues that may have existed regarding our historic management of regulated refrigerants. The DOJ, on behalf of the United States of America, filed a proof of claim in our bankruptcy case on March 21, 2005 based upon our refrigerant handling practices. Although the proof of claim does not set forth a specific amount, the claimants allege more than 3,400 violations during the period from 1998 through 2002 and assert that each violation is subject to penalties of up to $27,500 per day. Over the past several months, we re-opened settlement negotiations with the DOJ and EPA and, as a result of those negotiations, we have reached an agreement in principle to settle the DOJ and EPA’s claims through an allowed, pre-petition, general unsecured claim in the amount of approximately $1.1 million, which is subject to Bankruptcy Court approval.

On June 11, 2003, the South Coast Air Quality Management District in California, or SCAQMD, issued a Notice of Violation alleging that we had failed to operate catalytic oxidizers on bakery emissions at our Pomona, California facility in accordance with the conditions of that facility’s Clean Air Act Title V Permit. Among other things, that permit requires that the operating temperatures of the catalytic oxidizers be at least 550 degrees Fahrenheit. Under the South Coast Air Quality Management District rules, violations of permit conditions are subject to penalties of up to $1,000 per day, for each day of violation. The ~~Notice~~reconciliation of ~~Violation alleges we were in violation of~~ the ~~permit~~ ~~through~~provision temperature deviations on more than 700 days from September 1999 through June 2003. Since that time, four additional instances of alleged violations, some including more than one day, have been cited by the SCAQMD. We are cooperating with the SCAQMD, have taken steps to remove the possible cause of the deviations alleged in the Notice of Violation, applied for ~~and~~income ~~received~~taxes a new permit, and have replaced the oxidizers with a single, more effective oxidizer. The SCAQMD filed a proof of claim dated December 8, 2004 in our bankruptcy case for $0.2 million in civil penalties. We have reached an agreement in principle to ~~settle~~ the ~~SCAQMD~~statutory ~~claim~~federal ~~through~~rate ~~an allowed, pre-petition, general unsecured claim in the amount of $150,000, which~~ is ~~awaiting~~as ~~finalization of~~follows: ~~a stipulation to be filed with the Bankruptcy Court.~~

We participate in the ABA Plan and believe that the ABA Plan has been historically administered as a multiple employer plan under ERISA and tax rules and should be treated as such. However, the amounts reflected in our financial statements were calculated on the basis of treating the ABA Plan as an aggregate of single employer plans under ERISA and tax rules, which is how the ABA Plan contends it should be treated. We have reflected our interest in the ABA Plan as an aggregate of single employer plans despite our position on the proper characterization of the ABA Plan due to representations we received from the ABA Plan and a 1979 determination issued by the PBGC (as discussed below). As of November 17, 2007, our net pension benefit obligation liability was approximately $70.5 million with respect to our respective interest in the ABA Plan, reflecting its characterization as an aggregate of single employer plans.


	Twenty-Four Weeks Ended
	November 15,			November 17,
	2008			2007
Statutory federal tax rate		35.0	%		35.0	%
State income tax, net		2.0			2.6
Valuation allowance increase		(30.5	)		(29.9	)
Adjustments to prior year tax accruals		2.5			—
Other		(4.4	)		(2.3	)


		4.6	%		5.4	%

27The income tax benefit we have recognized in 2009 relates principally to expected refunds of tax we previously paid, available to us pursuant to a federal statutory provision that permits certain net operating losses to be carried back ten years, offset in part by state income taxes. Only a portion of the net operating loss we incur is eligible for this treatment. Our effective tax rate for fiscal 2009 is based, in large part, upon our estimate of the amount of our fiscal 2009 loss which we expect to be eligible for the ten-year carryback. Our tax provision for fiscal 2008 also reflects the impact of the ten-year carryback.

AsWe aprovide ~~result of~~ a ~~request~~valuation ~~made~~allowance byagainst usdeferred ~~and~~tax ~~the~~assets ~~Kettering Baking Company~~if, ~~another~~based ~~participating employer~~on inmanagement’s ~~the ABA Plan, the PBGC, which is the federal governmental agency that insures and~~assessment ~~supervises defined benefit pension plans, revisited its 1979 determination that the ABA Plan was an aggregate~~ of ~~single~~operating ~~employer~~results ~~plans~~ and ~~after~~other ~~reviewing~~available ~~the status of the ABA Plan~~evidence, onit ~~August 8, 2006,~~is ~~made~~more alikely ~~final~~than ~~determination~~not that ~~the~~some ~~ABA~~or ~~Plan~~all ~~is a multiple employer plan under ERISA. On August 9, 2006, we filed a lawsuit in Bankruptcy Court seeking enforcement~~ of the ~~PBGC’s determination,~~deferred ~~but~~tax ~~there~~assets ~~can be no assurance as to whether we~~ will ~~obtain~~not ~~such~~be ~~enforcement or the amount of any reduction to our net benefit obligation liability~~realized. ~~Accordingly,~~Valuation ~~due~~allowances towere ~~the~~recorded ~~lack~~in ~~of a definitive resolution of this uncertainty prior to the end of the~~ fiscal ~~periods~~2009 ~~presented herein,~~and as2008 ~~noted~~against ~~above~~deferred wetax ~~have~~assets ~~continued~~originating ~~to reflect our interests~~ in ~~the~~those ~~ABA Plan as an aggregate of single employer plans~~periods.

InOur ~~our~~total ~~December 2005~~liability ~~submission~~for ~~requested~~unrecognized bytax ~~the~~benefits, ~~PBGC~~including ininterest ~~connection~~and ~~with its review of the 1979 determination referred to above~~penalties, weis ~~asserted our belief based on available information that~~$6.8 ~~treatment~~million ofand ~~the~~$8.9 million ~~ABA Plan~~ as ~~a multiple employer plan will result in an allocation~~ of ~~pension~~November 15, ~~plan assets~~2008 toand ~~our~~May 31, ~~pension~~2008, ~~plan participants in an amount equal to approximately $40 million~~respectively. ~~We believe~~The ~~that~~portion ~~treatment~~ of these ~~the~~balances ~~ABA~~which ~~Plan as a multiple employer plan~~ will ~~result~~favorably inimpact athe ~~significant reduction~~effective intax ~~our~~rate, ~~net~~if ~~pension~~recognized, ~~benefit obligation with respect to our employee participants from that which~~ is ~~reflected in Note 11~~$6. ~~Employee Benefit Plans to these condensed consolidated financial~~8 million ~~statements~~and $8.9 million, ~~The ultimate outcome of this uncertainty cannot presently be determined~~respectively.

~~In addition, we have received requests for additional corrective contributions since January 2006, under the single employer plan assumption, which we do not believe is correct.~~ We ~~have~~recognize ~~not~~accrued ~~made such~~interest contributions pending the resolution of the uncertainties surrounding the ABA Plan. However, we expect that the amount of such contributions would be significantly less than amounts assessed by the ABA Plan on their assumption that the plan was an aggregate of single employer plans. On May 3, 2006, Sara Lee Corporation instituted proceedings against the ABA Plan and ~~the~~penalties ~~Board~~related ofto ~~Trustees of~~uncertain ~~the~~tax ~~Plan~~positions ~~(the “Board of Trustees”)~~ in ~~the~~income ~~United States District Court for the District of~~tax ~~Columbia (the “District Court”)~~expense. ~~Sara~~As ~~Lee~~of ~~Corporation v. American Bakers Ass’n Retirement Plan~~November 17, ~~et al.,~~2008 ~~Case~~and ~~No.~~May ~~1:06-cv-00819-HHK (D.D.C.) (the “Sara Lee Litigation”). The relief Sara Lee seeks includes~~31, ~~among other things~~2008, ~~a mandatory injunction that would compel~~ the ~~ABA~~total ~~Plan~~amount ~~and the Board~~ of ~~Trustees~~accrued toincome ~~(i) require all participating employers in the ABA Plan with negative asset~~tax-related ~~balances—~~interest ~~which~~and ~~would~~penalties ~~include~~included ~~the Company — to make payments to the Plan~~ in ~~order to maintain a positive asset balance and (ii) cut off~~ the ~~payment~~consolidated ~~from the ABA Plan of benefits to employee-participants of the Company and other participating employers with negative asset balances, to the extent such employers did not maintain a positive~~ balance. ~~However,~~sheet ~~the~~was Sara Lee Litigation is premised on the notion that the ABA Plan is an aggregate of single employer plans, which is inconsistent with the PBGC’s determination dated August 8, 2006 that the ABA Plan is a multiple employer plan$0. ~~On September~~3 ~~29, 2006, Sara Lee filed an amended complaint adding the PBGC as a defendant and challenging the PBGC’s August 8, 2006 determination~~million. ~~In order to obtain a~~ resolution of these matters without litigation over the proper forum, we have voluntarily stayed our lawsuit in Bankruptcy Court seeking enforcement of the August 8, 2006 determination upon the agreement by the ABA Plan and its Board of Trustees to join IBC as a party to the Sara Lee Litigation.

OnOur ~~December 4,~~U.S. ~~2006,~~federal ~~the~~income ~~ABA~~tax ~~Plan~~returns ~~and~~have ~~the~~been ~~Board~~examined ofby ~~Trustees~~the ~~served~~Internal aRevenue ~~summons~~Service ~~upon us as a third~~through ~~party~~fiscal ~~defendant~~2007. toWith alimited ~~Third~~exception, ~~Party~~in ~~Complaint~~accordance ~~filed~~with inbankruptcy ~~the~~law, ~~Sara~~we ~~Lee~~believe ~~Litigation~~that ~~against~~any ~~Sara~~audits of ~~Lee~~our ~~and the~~state ~~other~~income ~~participating~~tax ~~employers~~returns infor ~~the~~years ~~ABA~~prior ~~Plan.~~to ~~The~~fiscal ~~Third~~2008 ~~Party~~would ~~Complaint~~not ~~seeks~~result ain ~~declaratory~~additional ~~judgment~~liabilities as to ~~the~~us. ~~nature~~It ofis ~~the~~reasonably ~~ABA~~possible ~~Plan~~that ~~and~~a ~~further~~reduction ~~asserts~~of ~~that~~unrecognized ~~the~~tax ~~August 8,~~benefits ~~2006~~in ~~determination~~the ~~was~~range ~~arbitrary~~of ~~and~~$0 ~~capricious~~to ~~and~~$2 million ~~should~~may beoccur ~~rescinded.~~in Atthe ~~this~~next ~~time,~~12 months wedue ~~believe~~to ~~all~~developments ~~relevant~~pertaining ~~parties have been joined~~ to the examination ~~Sara Lee Litigation and the District Court for the District~~ of ~~Columbia will~~open ~~review~~tax ~~the PBGC’s determination~~years.

~~On November 22, 2006, the ABA Plan and the Board of Trustees filed a motion in the Bankruptcy Court~~23 seeking an order requiring IBC to file an application with the Internal Revenue Service requesting a waiver of the minimum funding requirements applicable to the ABA Plan or, in the alternative, make $3.9 million of contributions to the ABA Plan no later than June 15, 2007. On December 8, 2006, the Bankruptcy Court denied the ABA’s motion.

28 Table of Contents

On April 4, 2007, the PBGC filed a motion for summary judgment in the Sara Lee Litigation asking the District Court to enforce the PBGC’s August 8, 2006, determination that the ABA Plan is a multiple employer plan16. ~~Briefing~~Commitments ~~on the PBGC’s motion for summary judgment concluded on June 8, 2007,~~ and ~~oral argument was heard on July 2, 2007. On September 11, 2007, the District Court issued~~Contingencies a partial ruling on the PBGC’s motion for summary judgment. In its opinion, the District Court agreed with the PBGC and IBC as to the requisite standard for its review, but declined to review the PBGC’s August 8, 2006, determination until after it can decide whether the administrative record filed by the PBGC is complete. We await the District Court’s rulings on both the completeness of the administrative record and the PBGC’s August 8, 2006, determination.

On ~~February~~September 1622, ~~2007~~2004, or the Petition Date, we and each of our wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, or the Bankruptcy Code, in the United States Bankruptcy Court ~~approved~~for the ~~employment~~Western ~~agreement~~District of ~~Craig~~Missouri, Dor the Bankruptcy Court (Case Nos. ~~Jung~~04-45814, ~~as our~~04-45816, ~~Chief~~04-45817, ~~Executive~~04-45818, ~~Officer~~04-45819,04-45820, 04-45821 and 04-45822). ~~member~~On ofSeptember 24, ~~our~~2004, ~~Board~~the official committee of ~~Directors~~unsecured creditors was appointed in our Chapter 11 cases. ~~Under~~On November 29, 2004, the ~~terms~~official committee of ~~the~~equity ~~employment~~security holders was ~~agreement,~~appointed Mrin our Chapter 11 cases. On October ~~Jung~~1, ~~will~~2008, ~~receive~~the ~~pre-emergence~~United ~~cash~~States ~~awards~~trustee ~~upon~~disbanded the official ~~achievement~~committee of ~~certain~~equity ~~levels~~security holders. On January 14, 2006, Mrs. Cubbison’s, a subsidiary of ~~Total~~which ~~Enterprise~~we ~~Value~~are ~~(as~~an ~~defined~~eighty percent owner, filed a voluntary petition for relief under the Bankruptcy Code in the ~~employment~~Bankruptcy ~~agreement~~Court (Case No. 06-40111). ~~and~~We aare ~~post-emergence~~continuing ~~equity award,~~to ~~all~~operate asour ~~provided~~business as a debtor-in-possession under the ~~employment~~jurisdiction ~~agreement~~of ~~together~~the Bankruptcy Court and in accordance with ~~certain~~the applicable ~~other~~provisions ~~payments~~of the Bankruptcy Code and ~~benefits.~~ ~~The~~the ~~post-emergence~~orders ~~equity~~of ~~award~~the ~~will~~Bankruptcy ~~not~~Court. beAs a ~~liability~~result of the ~~IBC~~filing, inour ~~the~~pre-petition ~~event~~obligations, ~~that~~including aobligations under debt instruments, may not be ~~settlement~~generally ofenforceable ~~our~~against ~~liabilities~~us ~~subject~~and any actions to ~~compromise~~collect pre-petition indebtedness and ~~other~~most legal ~~matters~~proceedings ~~would~~are ~~result~~automatically instayed, aunless ~~change~~the ~~in control~~stay ofis lifted by the ~~Company~~Bankruptcy Court.

~~Effective~~On ~~April~~August 2512, ~~2007~~2004, ~~the~~we ~~Bankruptcy~~issued ~~Court~~$100.0 million ~~approved~~aggregate principal amount of our 6.0% senior subordinated convertible notes due August 15, 2014 (the ~~employment~~Convertible ~~agreement~~Notes) in a private placement to six institutional accredited investors under an exemption from registration pursuant to Rule 506 of ~~Kent~~Regulation D Bpromulgated by the SEC. ~~Magill~~The convertible notes were purchased by Highbridge International LLC, Isotope Limited, AG Domestic Convertibles LP, AG Offshore Convertibles LTD, ~~our~~Shepherd ~~Executive~~Investments ~~Vice~~International, ~~President~~Ltd., ~~General~~and ~~Counsel~~Stark Trading. Between the dates of September 2 and September 21, ~~Corporate~~2004, ~~Secretary~~we received written correspondence from all of the initial purchasers of the convertible notes stating that it was their position that we had made certain misrepresentations in connection with the sale of the notes. ~~Under~~On December 6, 2004, U.S. Bank National Association, as indenture trustee, filed proofs of claim in our bankruptcy case on behalf of the note holders in the amount of $100.7 million, plus any other amounts owing pursuant to the terms of the indenture ~~employment~~and ~~agreement~~reimbursement of the trustee’s fees and expenses. In addition, Mron March 18, 2005, R 2 Investments, LDC (R 2 Investments) filed a proof of claim in the amount of $70.4 ~~Magill~~million ~~will~~plus ~~receive~~interest, ~~pre~~fees and expenses based on its holdings of 70% of the notes, which were acquired through secondary trading. On September 5, 2008, R 2 Investments filed an action in the Circuit Court of Jackson County, Missouri, Case No. 0816-~~emergence~~27077, ~~cash~~against ~~awards~~certain of our former and current directors and a former officer stating a cause of action based upon alleged negligent misrepresentations made by the ~~achievement~~named defendants in connection with the issuance of the ~~certain~~Convertible ~~levels~~Notes. The action sought recovery of ~~Total~~the ~~Enterprise~~total ~~Value~~amount ~~(as~~of ~~defined~~the inConvertible Notes held by the ~~employment~~plaintiff ~~agreement)~~plus accrued interest. On December 9, 2008, upon consideration of a stipulation for dismissal unilaterally filed by the plaintiff, the Circuit Court entered an Order dismissing this action without prejudice.

OnWe ~~November 2,~~are ~~2007,~~named ~~the~~in ~~Pacific~~two ~~Southwest~~wage ~~Teamsters~~and ~~Bakery~~hour ~~Drivers~~cases ~~Council~~in ~~filed~~New aJersey ~~grievance~~that have been brought under state law, one ~~the~~of ~~southern~~which ~~California~~has ~~Teamsters’~~been ~~collective~~brought ~~bargaining~~on ~~agreements~~behalf of a putative class of Route Sales Representatives. The ~~grievance~~case involving ~~alleges~~the ~~that IBC~~putative ~~violated~~class ~~the~~is ~~agreements~~captioned byRuzicka, ~~denying~~et ~~severance~~al. ~~pay~~v. toInterstate ~~Teamster-represented~~Brands ~~employees~~Corp., ~~who~~et ~~worked~~al. The ~~under~~other ~~the~~case ~~agreements~~is ~~and~~captioned ~~who~~McCourt, ~~IBC~~et ~~laid-off~~al. ~~when~~v. ~~IBC~~Interstate ~~exited~~Brands ~~the~~Corp. ~~southern~~These ~~California~~cases ~~bread~~are ~~market.~~consolidated ~~IBC’s~~under ~~position~~case isNo. 1-03-CV-00220 ~~that~~(FLW) ~~the~~(D.N.J.). ~~agreements~~As doa ~~not~~result ~~provide~~of ~~for~~our Chapter 11 filing, these cases were ~~severance~~automatically ~~pay~~stayed. However, the automatic stay was lifted, and ~~severance~~as ~~related~~a ~~benefit~~result ~~costs~~of ~~for~~a ~~employees~~mediation in ~~the~~ ~~particular~~late ~~circumstances.~~July 2008, ~~The~~the ~~Teamsters~~parties have ~~submitted~~reached ~~the~~agreement ~~dispute~~in principle to ~~the~~settle ~~arbitration~~these ~~procedure~~cases through an ~~under~~allowed, pre-petition general unsecured claim in the ~~agreements~~amount of $2.0 million, ~~IBC~~which ~~will~~is ~~defend~~subject ~~its~~to Bankruptcy ~~position~~Court byand ~~presenting~~New ~~its~~Jersey ~~full~~Federal ~~evidence~~Court ~~and~~approval. ~~arguments~~This amount is reflected in liabilities subject to compromise in the ~~arbitrator~~November 15, 2008 financial statements.

~~During~~The EPA has made inquiries into the ~~second~~refrigerant ~~quarter~~handling practices of ~~fiscal~~companies ~~2008~~in our industry. In September 2000, we ~~incurred~~received ~~debt~~a ~~fees~~request offor ~~$0.6 million~~information ~~for~~from the ~~October 1,~~EPA ~~2007~~relating ~~amendment~~ to our ~~DIP~~handling ~~Facility~~of regulated ~~and~~refrigerants, awhich ~~fee~~we ofhistorically ~~$5.0 million~~have toused ~~secure~~in anequipment ~~exit~~in ~~facility commitment~~our bakeries for ~~financing~~a number of purposes, including to ~~exit~~cool ~~our~~the ~~Chapter 11~~dough ~~proceedings.~~during ~~These~~the ~~fees~~production ~~are~~process. ~~included~~The inEPA ~~other~~has entered into ~~assets~~negotiated insettlements ~~the~~with ~~November 17,~~two ~~2007~~companies ~~balance~~in ~~sheet.~~our ~~The~~industry, ~~exit~~and ~~financing~~has ~~agreement~~offered ~~stipulates~~a ~~that~~partnership ~~under~~program to ~~certain~~other ~~conditions,~~members ~~including~~of the ~~acceptance~~bakery byindustry ~~the~~that ~~Bankruptcy~~offered ~~Court~~amnesty offrom anfines ~~alternative~~if ~~financing~~participating companies ~~agreement,~~converted wetheir ~~may~~equipment ~~owe~~to upeliminate tothe ~~$12.0 million~~use inof ~~breakup~~ozone-depleting ~~fees~~substances. ~~Additionally,~~Because ~~certain~~we ~~actions by the~~had ~~Bankruptcy~~previously ~~Court~~received ~~concerning~~an ~~our~~information ~~emergence~~request ~~could~~from ~~result~~the inEPA, the ~~impairment~~EPA/Department of Justice (DOJ) policies indicated that we were not eligible to participate in the $5partnership program.~~0 million~~ ~~commitment~~Nevertheless, ~~fee.~~we undertook our

~~Except as noted above, the Company has not determined a loss is probable, or a liability has been~~24 incurred, and cannot estimate a range of loss or amount of liability for the items disclosed herein; however, the ultimate resolutions could have a material impact on our condensed consolidated financial statements.

WeTable are subject to various other routine legal proceedings, environmental actions and matters in the ordinary course of business, some of which may be covered in whole or in part by insurance. Except for the matters disclosed herein, we are not aware of any other items as of this filing which could have a material adverse effect on our condensed consolidated financial statements. Contents

17own voluntary program to convert our industrial equipment to reduce the use of ozone-depleting refrigerants. ~~Earnings~~Prior ~~(Loss)~~to our Chapter 11 filing, we had undertaken negotiations with the EPA to resolve issues that may have existed regarding our historic management of regulated refrigerants. The DOJ, on behalf of the United States of America, filed a proof of claim in our bankruptcy case on March 21, 2005 based upon our refrigerant handling practices. Although the proof of claim does not set forth a specific amount, the claimants allege more than 3,400 violations during the period from 1998 through 2002 and assert that each violation is subject to penalties of up to $27,500 per day. ~~Share~~We re-opened settlement negotiations with the DOJ and EPA, and as a result of those negotiations, we have reached an agreement in principle to settle the DOJ and EPA’s claims through an allowed, pre-petition, general unsecured claim in the amount of approximately $1.1 million, which is subject to Bankruptcy Court approval.

~~Basic~~On ~~and~~June 11, ~~diluted~~2003, ~~earnings~~the ~~per~~South ~~share~~Coast ~~are~~Air ~~calculated~~Quality Management District in California, or SCAQMD, issued a Notice of Violation alleging that we had failed to operate catalytic oxidizers on bakery emissions at our Pomona, California facility in accordance with ~~SFAS~~the Noconditions of that facility’s Clean Air Act Title V Permit. ~~128~~ Among other things, ~~Earnings~~that ~~per~~permit requires that the operating ~~Share~~temperatures of the catalytic oxidizers be at least 550 degrees Fahrenheit. ~~Basic~~Under ~~earnings~~the ~~per~~South ~~common~~Coast Air ~~share~~Quality isManagement ~~computed~~District byrules, ~~dividing~~violations ~~net~~of ~~income~~permit ~~(loss) by~~conditions ~~the~~are ~~weighted~~subject to penalties of ~~average~~up ~~number~~to $1,000 per day, for each day of ~~common~~violation. ~~shares~~The ~~outstanding~~Notice ~~during~~of Violation alleges we were in violation of the ~~period~~permit through temperature deviations on more than 700 days from September 1999 through June 2003. ~~Diluted~~Since ~~earnings~~that ~~per~~time, ~~common~~four ~~share~~additional instances of alleged violations, some including ismore ~~computed~~than byone ~~dividing~~day, ~~net~~have ~~income~~been ~~(loss)~~ cited by the ~~weighted~~SCAQMD. ~~average~~We ~~number~~are ofcooperating ~~common~~with ~~shares~~the SCAQMD, have taken ~~outstanding~~steps ~~during~~to remove the ~~period~~possible ~~including~~cause of the ~~effect~~deviations alleged in the Notice of ~~all~~Violation, ~~potential~~applied ~~dilutive~~for ~~common~~and ~~shares~~received a new permit, ~~primarily~~and ~~stock~~have ~~options~~replaced ~~outstanding~~the ~~under~~oxidizers with a single, more effective oxidizer. The SCAQMD filed a proof of claim dated December 8, 2004 in our ~~stock~~bankruptcy ~~compensation~~case ~~plan~~for $0.2 million ~~and~~in civil penalties. We have reached an agreement in principle to settle the SCAQMD claim through an allowed, pre-petition, general unsecured claim in the ~~impact~~amount of ~~our~~$150,000, 6%which ~~senior~~is awaiting ~~subordinated~~finalization ~~convertible~~of ~~notes~~a stipulation to be filed with the Bankruptcy Court.

29We participate in the ABA Plan and believe that the ABA Plan has been historically administered as a multiple employer plan under ERISA and tax rules and should be treated as such. However, the amounts reflected in our financial statements were calculated on the basis of treating the ABA Plan as an aggregate of single-employer plans under ERISA and tax rules, which is how the ABA Plan contends it should be treated. We have historically reflected our interest in the ABA Plan as an aggregate of single-employer plans despite our position on the proper characterization of the ABA Plan due to representations we received from the ABA Plan and a 1979 determination issued by the PBGC (as discussed below).

~~The~~As ~~following~~a result of a request made by us and the Kettering Baking Company, another participating employer in the ABA Plan, the PBGC, which is the ~~basic~~federal governmental agency that insures and supervises ~~diluted~~defined ~~weighted~~benefit ~~average~~pension ~~shares~~plans, ~~outstanding~~revisited ~~used~~its 1979 determination that the ABA Plan was an aggregate of single-employer plans and after reviewing the status of the ABA Plan, on August 8, 2006, made a final determination that the ABA Plan is a multiple employer plan under ERISA. On August 9, 2006, we filed a lawsuit in ~~our~~Bankruptcy Court seeking enforcement of the PBGC’s ~~earnings~~determination, ~~per~~but ~~share~~there ~~computations:~~can be no assurance as to whether we will obtain such enforcement or the amount of any reduction to our net benefit obligation liability.

	Twelve Weeks Ended				Twenty-Four Weeks Ended
	November 17,		November 18,		November 17,		November 18,
	2007		2006		2007		2006
	(in thousands)
Weighted average common shares outstanding:
Basic and diluted		45,186		45,165		45,185		45,165

In our December 2005 submission requested by the PBGC in connection with its review of the 1979 determination referred to above, we asserted our belief based on available information that treatment of the ABA Plan as a multiple employer plan will result in a significant allocation of pension plan assets to our pension plan participants. In addition, we have received requests for additional corrective contributions since January 2006, under the single-employer plan assumption, which we do not believe is correct. We have not made such contributions pending the resolution of the uncertainties surrounding the ABA Plan.

~~Diluted~~On ~~weighted~~May 3, ~~average~~2006, ~~common~~Sara ~~shares~~Lee ~~outstanding~~Corporation ~~exclude~~instituted ~~options~~proceedings onagainst ~~common~~the ~~stock,~~ABA ~~unvested~~Plan and the Board of ~~restricted~~Trustees ~~stock~~of ~~and~~the ~~deferred~~Plan ~~shares~~(the ~~awarded,~~“Board ~~and~~of ~~our~~Trustees”) 6%in ~~senior~~the ~~subordinated~~United ~~convertible~~States ~~notes,~~District Court for the District ~~which~~of ~~aggregated~~Columbia to(the ~~approximately~~“District 12Court”).~~9 million~~ ~~and~~Sara 13Lee Corporation v.8 American Bakers Ass’n Retirement Plan, et al., Case No. ~~million~~1:06-cv-00819-HHK ~~for~~(D.D.C.) (the ~~second~~“Sara ~~quarter~~Lee ofLitigation”). ~~fiscal 2008~~The ~~and~~relief ~~2007~~Sara Lee seeks includes, ~~respectively~~among other things, ~~and~~a ~~approximately~~mandatory ~~13.0 million~~injunction that would compel the ABA Plan and ~~14.0 million~~the ~~for~~Board of ~~year-~~Trustees to~~-date fiscal~~ ~~2008~~(i) require ~~and~~all ~~2007,~~participating ~~respectively,~~employers ~~because~~in ~~their~~the ~~effect~~ABA Plan with negative asset balances— which would ~~have~~include ~~been~~the ~~antidilutive.~~Company ~~Due~~— to ~~our reported~~make ~~net~~payments ~~losses~~to ~~for~~the ~~all~~Plan ~~periods,~~in ~~diluted~~order ~~loss~~to ~~per~~maintain ~~share~~a positive ~~amounts~~asset ~~are~~balance ~~not~~and ~~adjusted~~(ii) cut ~~for~~off the ~~effect~~payment from the ABA Plan of benefits to employee-participants of ~~dilutive~~the ~~stock~~Company ~~awards.~~and other participating employers with negative asset balances, to the extent such

~~Under an August 12, 2004 amendment to our Senior Secured Credit Facility, we are prohibited from~~25 paying dividends until our senior secured bank debt is rated at least BB- by Standard & Poor’s Ratings Services and Ba3 by Moody’s Investors Service, in each case with a stable outlook or better. In addition, during the term of the DIP Facility, the payment of dividends is prohibited.

18.Table Comprehensiveof Loss Contents

~~Reconciliations~~employers did not maintain a positive balance. However, the Sara Lee Litigation is premised on the notion that the ABA Plan is an aggregate of ~~net~~single-employer ~~loss~~plans, which is inconsistent with the PBGC’s determination dated August 8, 2006 that the ABA Plan is a multiple employer plan. On September 29, 2006, Sara Lee filed an amended complaint adding the PBGC as a defendant and challenging the PBGC’s August 8, 2006 determination. In order to ~~comprehensive~~obtain ~~loss~~a ~~are~~resolution of these matters without litigation over the proper forum, we have voluntarily stayed our lawsuit in Bankruptcy Court seeking enforcement of the August 8, 2006 determination upon the agreement by the ABA Plan and its Board of Trustees to join IBC as ~~follows:~~a party to the Sara Lee Litigation.

	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 17,			November 18,			November 17,			November 18,
	2007			2006			2007			2006
	(dollars in thousands)
Net loss	$	(39,161	)	$	(26,285	)	$	(55,154	)	$	(52,616	)
Other comprehensive loss:
Amortization of pension and other postretirement net credits		(1,468	)		—			(2,936	)		—
Comprehensive loss	$	(40,629	)	$	(26,285	)	$	(58,090	)	$	(52,616	)

On December 4, 2006, the ABA Plan and the Board of Trustees served a summons upon us as a third party defendant to a Third Party Complaint filed in the Sara Lee Litigation against Sara Lee and the other participating employers in the ABA Plan. The Third Party Complaint seeks a declaratory judgment as to the nature of the ABA Plan and further asserts that the August 8, 2006 determination was arbitrary and capricious and should be rescinded. At this time, we believe all relevant parties have been joined to the Sara Lee Litigation and the District Court for the District of Columbia will review the PBGC’s determination.

19On November 22, 2006, the ABA Plan and the Board of Trustees filed a motion in the Bankruptcy Court seeking an order requiring IBC to file an application with the Internal Revenue Service requesting a waiver of the minimum funding requirements applicable to the ABA Plan or, in the alternative, make $3.9 million ~~Segment~~of ~~Information~~contributions to the ABA Plan no later than June 15, 2007. On December 8, 2006, the Bankruptcy Court denied the ABA’s motion.

~~SFAS~~On ~~No.~~April ~~131~~4, ~~Disclosures~~2007, ~~about~~the ~~Segments~~PBGC offiled ana ~~Enterprise~~motion ~~and~~for ~~Related~~summary ~~Information,~~judgment ~~requires~~in usthe toSara Lee Litigation asking ~~report~~the ~~information~~District ~~about~~Court ~~our~~to ~~operating~~enforce ~~segments~~the ~~according~~PBGC’s toAugust 8, ~~management~~2006, determination that the ABA Plan is a multiple employer plan. Briefing on the PBGC’s ~~approach~~motion for ~~determining~~summary judgment concluded on June 8, ~~reportable~~2007, ~~segments~~and oral argument was heard on July 2, 2007. ~~This~~On ~~approach~~September 11, is2007, ~~based~~the District Court issued a partial ruling on the ~~way~~PBGC’s ~~management~~motion ~~organizes~~for ~~segments~~summary ~~within~~judgment. aIn its opinion, the District Court ~~company~~agreed with the PBGC and IBC as to the requisite standard for ~~making~~its ~~operating~~review, ~~decisions~~but ~~and~~declined ~~assessing~~to ~~performance~~review the PBGC’s August 8, 2006, determination until after it could decide whether the administrative record filed by the PBGC was complete. On August 27, 2008, the District Court ruled that the administrative record was complete. We now await the District Court’s ruling on the PBGC’s August 8, 2006 determination.

30Effective November 7, 2008, we withdrew from the ABA Plan. Consequently, we have ceased any and all contributions and contributory obligations to the ABA Plan. Given the uncertainty of the outcome of the Sara Lee Litigation, we entered into Compromise and Settlement Agreements with both the PBGC and the ABA Plan in order to fix our liability with regard to the ABA Plan.

We ~~initiated~~entered ~~changes~~into ina ~~our~~Compromise ~~reporting~~and ~~system~~Settlement ~~effective~~Agreement ~~for~~with the ~~beginning of fiscal 2008~~PBGC, which ~~resulted~~ inwas ~~the~~approved ~~identification~~by ofthe Bankruptcy ~~three~~Court ~~distinct~~on ~~reportable~~November 13, ~~segments~~2008. The ~~three~~agreement ~~reportable segments~~provides ~~were~~that ~~determined~~(i) the byPBGC ~~type~~will ofbe ~~customer~~granted ~~and~~an allowed ~~distribution~~pre-petition ~~method.~~general ~~Management~~unsecured ~~continues~~claim ~~to maintain~~in the ~~wholesale~~amount ~~operations~~of $17.5 million; and ~~retail~~(ii) if ~~operations as reporting segments, but renamed them as route sales~~ and ~~outlet sales, respectively. The third reporting segment, direct sales, was~~only ~~established~~if bythe ~~segregating~~ABA ~~certain~~Plan ~~operations~~is ~~previously~~ultimately ~~within~~determined ~~wholesale~~in ~~operations~~the ~~that~~Sara ~~deliver products~~Lee ~~exclusively~~Litigation ~~through~~to ~~warehouse~~be ~~channels.~~an ~~Our~~aggregate ~~reportable segments are strategic business~~of ~~units~~single-employer ~~that~~plans, ~~are~~the ~~managed~~PBGC ~~separately~~will ~~using~~be ~~different~~granted ~~distribution~~an ~~and~~allowed ~~marketing~~pre-petition ~~strategies.~~general ~~Prior year’s~~unsecured ~~amounts~~claim ~~have been revised to reflect~~ in the ~~current~~amount ~~fiscal~~of ~~year’s segment reporting presentation~~$72.5 million.

~~Route~~Similarly, ~~sales~~we ~~(formerly~~entered ~~wholesale~~into ~~operations)~~a —Compromise ~~Our~~and ~~route~~Settlement ~~sales~~Agreement ~~accounted~~with ~~for~~the ~~approximately~~ABA ~~86.1%~~Plan, ~~and~~which was ~~86.6%~~approved ofby ~~our net sales for~~ the ~~twelve~~Bankruptcy ~~weeks~~Court ~~ended~~on ~~and~~December 1, 862008.5% ~~and~~The ~~86.9%~~agreement ~~for~~provides that the ~~twenty-four~~ABA ~~weeks~~Plan ~~ended~~will ~~November 17,~~be ~~2007~~granted ~~and November~~(i) ~~18,~~an ~~2006,~~allowed ~~respectively,~~pre-petition ~~and~~general ~~consists~~unsecured ofclaim anin ~~aggregation~~the amount of ~~our~~$6.0 million; ~~operations that manufacture, distribute,~~ and ~~sell~~(ii) an ~~fresh~~allowed ~~baked~~administrative ~~goods~~expense ~~utilizing~~claim ~~our~~in ~~direct~~the ~~store delivery~~amount ~~system~~of $0.8 million.

~~Outlet~~Consistent ~~sales~~with ~~(formerly~~our ~~retail~~prior ~~operations)~~accounting —treatment ~~Our outlet sales generated approximately 10.6% and 11.3%~~ of ~~our net sales for~~ the ~~twelve~~ABA ~~weeks~~Plan, ~~ended~~we ~~and~~increased ~~10.7%~~our ~~and~~liability ~~11.4%~~to ~~for the twenty-four weeks~~$79.3 ~~ended~~million ~~November 17,~~at ~~2007 and~~ November 1815, ~~2006,~~2008 ~~respectively,~~representing ~~and~~the ~~consists~~total ofclaims ~~five~~granted ~~regions~~on ~~that~~an ~~sell~~aggregate of ~~our~~single-employer ~~baked~~plans ~~goods~~basis ~~and~~under ~~other~~the ~~food~~settlement ~~items directly to consumers through company-operated outlet locations~~agreements.

~~Direct~~On ~~sales~~February 16, —2007, ~~Our~~the ~~direct~~Bankruptcy ~~sales~~Court ~~generated~~approved ~~approximately~~the 3employment agreement of Craig D.3% Jung as our Chief Executive Officer and ~~2.1%~~member of our ~~net~~Board ~~sales~~of ~~for~~Directors. Under the ~~twelve~~ ~~weeks~~terms ~~ended~~of ~~and~~the 2employment agreement, Mr.8% Jung ~~and~~will ~~1.7%~~receive ~~for~~pre-emergence cash awards upon the ~~twenty-four~~achievement ~~week~~of scertain ~~ended~~levels of ~~November~~Total Enterprise Value (as defined in the employment agreement). Mr. ~~17,~~Jung’s ~~2007~~employment ~~and~~agreement ~~November 18,~~also ~~2006,~~provides ~~respectively,~~for ~~and~~a ~~consists~~post-emergence ofequity ~~our~~award, ~~direct~~together ~~warehouse~~with ~~shipment~~certain ~~program,~~other ~~which~~payments ~~ships~~and benefits. ~~bulk~~In ~~packaged~~the ~~sweet~~event ~~goods~~that ~~and~~Mr. Jung’s ~~dry~~employment ~~products,~~agreement ~~such~~is assumed as ~~croutons~~a ~~and~~part ~~stuffing~~of ~~mix,~~the ~~directly~~bankruptcy toprocess ~~customer-owned~~and ~~distribution~~the ~~centers~~Company ~~and~~emerges ~~public~~from ~~warehouses~~bankruptcy ~~for~~protection ~~distribution.~~pursuant to the Plan (or

~~Our management evaluates reportable segment performance based on profit or loss from operations~~26 before other income, interest expense, and income taxes. Because of our integrated business structure, operating costs often benefit all reportable segments and must be allocated between segments. However, we do not identify or allocate fixed assets and the related depreciation and capital expenditures for long-lived assets by reportable segment and we transfer fresh goods between segments at cost without recognizing intersegment sales on these transfers. Intersegment transfers of products at cost from route sales to outlet sales aggregated approximately $20.5 million and $25.8 million for the twelve weeks ended and $43.2 million and $53.5 million for the twenty-four weeks ended November 17, 2007 and November 18, 2006, respectively. Intersegment transfers of products at cost from route sales to direct sales aggregated approximately $11.6 million and $7.6 million for the twelve weeks ended and $22.4 million and $15.7 million for the twenty-four weeks ended November 17, 2007 and November 18, 2006, respectively.

TheTable measurement of reportable segment results is generally consistent with the presentation of the consolidated statement of operations. Contents

	Twelve Weeks Ended				Twenty-Four Weeks Ended
	November 17,		November 18,		November 17,		November 18,
	2007		2006 (A)		2007		2006 (A)
	(dollars in thousands)
Net Sales
Route sales	$	555,257	$	581,775	$	1,154,537	$	1,178,106
Outlet sales		68,232		75,676		142,302		154,876
Direct sales		21,627		14,462		38,093		23,176
Total net sales	$	645,116	$	671,913	$	1,334,932	$	1,356,158
Segment Income
Route sales	$	6,401	$	5,481	$	29,658	$	12,595
Outlet sales		5,232		2,164		12,440		5,001
Direct sales		2,275		1,675		3,748		2,192

another plan of reorganization), the post-emergence equity award and other benefits to which Mr. Jung is entitled under his employment agreement will be obligations of the reorganized entity.

31Effective April 25, 2007, the Bankruptcy Court approved the employment agreement of Kent B. Magill, our Executive Vice President, General Counsel and Corporate Secretary. Under the terms of the employment agreement, Mr. Magill will receive pre-emergence cash awards upon the achievement of certain levels of Total Enterprise Value (as defined in the employment agreement).

	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 17,			November 18,			November 17,			November 18,
	2007			2006 (A)			2007			2006 (A)
	(dollars in thousands)
Total segment income		13,908			9,320			45,846			19,788
Corporate (B)		(30,654	)		(16,071	)		(62,856	)		(34,298	)
Total operating loss		(16,746	)		(6,751	)		(17,010	)		(14,510	)
Interest expense		11,263			11,368			22,283			24,158
Reorganization charges		11,707			10,052			18,905			16,707
Other income		128			(1,045	)		74			(1,076	)
		23,098			20,375			41,262			39,789
Loss before income taxes		(39,844	)		(27,126	)		(58,272	)		(54,299	)
Provision (benefit) for income taxes		(683	)		(841	)		(3,118	)		(1,683	)
Net loss	$	(39,161	)	$	(26,285	)	$	(55,154	)	$	(52,616	)

On November 2, 2007, the Pacific Southwest Teamsters Bakery Drivers Council filed a grievance under the Southern California Teamsters’ collective bargaining agreements. The grievance alleged that IBC violated the agreements by denying severance pay to Teamster-represented employees who worked under the agreements and who IBC laid-off when IBC exited the Southern California bread market. The Teamsters submitted the dispute to the arbitration procedure under the agreements. In December 2008, the arbitrator denied the Teamsters’ claim.

(A)		Prior year’s amounts have been revised to reflect the current fiscal year’s segment reporting presentation.
(B)		The corporate operating loss for the twelve weeks ended November 17, 2007 includes approximately $7.9 million for restructuring activities while the same period in the prior year includes a net restructuring credit of approximately $4.2 million. For the twenty-four weeks ended November 17, 2007, the corporate operating loss includes approximately $17.7 million for restructuring activities and property and equipment impairment while for the same period of the prior year includes a net restructuring credit of approximately $3.7 million.

On February 4, 2008, we received notice that the Sacramento County California District Attorney’s Consumer and Environmental Protection Division had opened an inquiry into whether the packaging for our 100 Calorie Pack snack cakes violated California law. Specifically, the inquiry was focused on whether the packaging contained “nonfunctional slack fill” and/or constituted “misleading advertising”. If the allegations were found to be true, the maximum penalty could be up to $5,000 per package offered for sale or sold in the state of California. Subsequently, the inquiry was joined by the Yolo County California District Attorney’s office. To date no formal charges have been filed, and we continue to cooperate in the inquiry. However, we believe that our packaging is not misleading and that any enforcement of slack fill regulations is pre-empted by federal statute and, therefore, only enforceable by the Federal Food and Drug Administration.

~~20.~~Except ~~Subsequent~~as ~~Events~~noted above, the Company has not determined a loss is probable, or a liability has been incurred, and cannot estimate a range of loss or amount of liability for the items disclosed herein; however, the ultimate resolutions could have a material impact on our consolidated financial statements.

~~Subsequent~~We toare ~~the~~subject ~~quarter-end, we entered into the following amendments~~ to ~~the~~various ~~DIP~~other ~~Facility.~~routine ~~The second~~legal ~~amendment~~proceedings, ~~dated~~environmental ~~November 29,~~actions ~~2007,~~and ~~changed~~matters ~~the~~in ~~date for delivery of a revised plan~~the ~~detailing~~ordinary ~~the~~course ~~Borrower’s proposed strategy for maximizing the value~~ of ~~the bankruptcy estates. If on or before January 29~~business, ~~2008,~~some ~~IBC~~of ~~has~~which ~~not~~may ~~reached~~be ancovered ~~agreement~~ in ~~principle~~whole ~~with~~or ~~our~~in ~~two~~part ~~largest union~~by ~~groups and Silver Point Finance L~~insurance.~~L.C.~~ ~~(or~~Except for anthe ~~approved~~matters ~~provider~~disclosed ~~of alternate exit financing~~herein, if ~~applicable)~~we ~~has~~are not ~~announced~~aware ~~its support~~ of ~~the~~any ~~labor~~other ~~agreements,~~items ~~then,~~as ~~the~~of ~~lenders~~this ~~may~~filing ~~request~~which could inhave ~~writing~~ a ~~plan~~material toadverse beeffect ~~delivered~~on ~~within~~our ~~twenty-one~~consolidated ~~days~~financial ~~of receipt of the written request~~statements.

Our third amendment, dated December 19, 2007, to the DIP Facility (1) extended the maturity date from February 9, 2008 to June 2, 2008; (2) redefined the real property component of the borrowing base to the lesser of (a) $8017.~~0 million~~ orEarnings (bLoss) ~~40%~~ ofper ~~the borrowing base inclusive of the real~~Share property component but excluding the Plan Reserve (as defined therein); (3) amended the permitted capital expenditures by fiscal quarter through the quarter ending May 31, 2008; (4) amended the minimum cumulative consolidated EBITDA by fiscal quarter through the quarter ending May 31, 2008; and (5) limited cash restructuring charges for the fiscal period beginning December 17, 2006 and ending May 31, 2008 to $23.0 million.

InBasic ~~connection~~and diluted earnings per share are calculated in accordance with SFAS No. 128, Earnings per Share. Basic earnings per common share is computed by dividing net income (loss) by the ~~execution~~weighted average number of common shares outstanding during the ~~third~~period. ~~amendment~~Diluted earnings per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period including the effect of all potential dilutive common shares, primarily westock ~~incurred~~options ~~debt~~outstanding ~~fees~~under our stock compensation plan and the impact of $0our 6% senior subordinated convertible notes.~~5 million.~~ The following is the basic and diluted weighted average shares outstanding used in our earnings per share computations:

Twelve Weeks Ended

Twenty-Four Weeks Ended

November 15,

November 17,

November 15,

November 17,

2008

2007

2008

2007

(in thousands)

Weighted average common shares outstanding:

Basic and diluted

45,212

45,186

45,212

45,185

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of~~27 ~~Operations~~

ThisTable discussion should be read in conjunction with our consolidated financial statements, notes, and tables included elsewhere in this report, as well as, the more detailed Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, contained in our 2007 Annual Report on Form 10-K and first quarter Form 10-Q. This MD&A may contain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, future performance involves risks and uncertainties, which may cause actual results to differ materially from those expressed in the forward-looking statements. See Forward-Looking Statements for further information. Contents

~~COMPANY~~Diluted ~~OVERVIEW~~weighted average common shares outstanding exclude options on common stock, unvested restricted stock (fiscal 2008 only), and our 6% senior subordinated convertible notes, which aggregated to approximately 12.3 million and 12.9 million for the second quarter of fiscal 2009 and 2008, respectively, and approximately 12.4 million and 13.0 million for year-to-date fiscal 2009 and 2008, respectively, because their effect would have been antidilutive. Due to our reported net losses for all periods, diluted loss per share amounts are not adjusted for the effect of dilutive stock awards.

~~Interstate~~Under ~~Bakeries~~an ~~Corporation~~August 12, is2004 ~~one~~amendment ofto ~~the~~our ~~largest~~Senior ~~wholesale~~Secured ~~bakers~~Credit ~~and distributors of fresh baked bread and sweet goods in the United States~~Facility, ~~producing,~~we ~~marketing,~~are ~~distributing~~prohibited ~~and~~from paying ~~selling~~dividends ~~a wide~~until ~~range~~our ofsenior ~~breads,~~secured ~~rolls,~~bank ~~croutons,~~debt ~~snack~~is ~~cakes,~~rated ~~donuts,~~at ~~sweet~~least ~~rolls~~BB- ~~and~~by ~~related~~Standard ~~products.~~& ~~Our~~Poor’s ~~various~~Ratings ~~brands~~Services ~~are positioned across a wide spectrum of consumer categories~~ and ~~price~~Ba3 ~~points.~~by ~~We currently~~Moody’s ~~operate~~Investors 42Service, ~~bakeries~~in ~~and~~each ~~approximately~~case ~~750~~with ~~bakery~~a ~~outlets~~stable ~~located~~outlook ~~in strategic markets~~or ~~throughout the United States~~better. ~~Our~~In ~~sales~~addition, ~~force~~during ~~delivers~~the ~~baked~~term ~~goods~~of ~~from~~the ~~approximately~~DIP ~~600 distribution~~Facility, ~~centers~~the onpayment ~~over~~of ~~6,100~~dividends ~~delivery~~is ~~routes~~prohibited.

~~RECENT~~18. ~~DEVELOPMENTS~~Comprehensive Loss

InReconciliations ~~early October 2007, we embarked on the process~~ of ~~formulating~~net aloss ~~rational strategy for maximizing value of the bankruptcy estates. We continue~~ to ~~face~~comprehensive ~~substantial~~loss ~~uncertainty~~are ~~with respect to the outcome of our efforts to maximize value of the bankruptcy estates, and there can be no assurance~~ as ~~to whether we will be able to successfully implement any such strategy, which may~~follows: include a sale of the Company and/or its assets, in whole or in part, on terms and conditions acceptable to the Company or to our various constituents in the bankruptcy or as to the ultimate recovery of value available to such constituents.

After receiving Bankruptcy Court approval, we entered into exit financing agreements with Silver Point Finance L.L.C. and its affiliated investment funds and plan funding agreements with holders of approximately 95% of the funded amounts outstanding under our pre-petition senior secured credit facility. This financing is contingent upon, among other things, us reaching agreement on, and achieving ratification of, the changes to our collective bargaining agreements with our major unions necessary to implement our business plan, which to date we have not achieved. On November 5, 2007, we filed a Plan of Reorganization and related Disclosure Statement with the Bankruptcy Court based upon the exit financing commitment by Silver Point Finance L.L.C. and plan funding agreements. Our exclusive period within which to file a plan of reorganization expired on November 8, 2007. Our exclusive period within which to solicit acceptances of our plan of reorganization expires on January 7, 2008.


	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 15,			November 17,			November 15,			November 17,
	2008			2007			2008			2007
	*(dollars in thousands)*
Net loss	$	(41,420	)	$	(39,161	)	$	(78,286	)	$	(55,154	)

Other comprehensive loss:
Amortization of pension and other postretirement net credits		(1,638	)		(1,468	)		(3,276	)		(2,936	)


Comprehensive loss	$	(43,058	)	$	(40,629	)	$	(81,562	)	$	(58,090	)

~~We have established bidding procedures, which have been approved by the Bankruptcy Court, to govern the process for soliciting alternative investment proposals~~19. ~~Under~~Segment ~~the procedures, indications of~~Information interest were due by November 28, 2007 with final proposals due on January 15, 2008. If multiple proposals are received, an auction is currently scheduled to be held on January 22, 2008. There can be no assurance that the necessary financing to fund a standalone plan to emerge from bankruptcy will be provided to us on acceptable terms or at all.

~~CRITICAL~~SFAS ~~ACCOUNTING~~No. 131, ~~POLICIES~~Disclosures about Segments of an Enterprise and Related Information, requires us to report information about our operating segments according to management’s approach for determining reportable segments. This approach is based on the way management organizes segments within a company for making operating decisions and assessing performance.

~~Refer~~We tohave ~~Critical~~aggregated ~~Accounting Policies in~~ our ~~2007~~identified ~~Annual~~operating ~~Report~~segments oninto ~~Form~~three ~~10-K~~distinct ~~for~~reportable ~~information on~~segments ~~accounting~~determined ~~policies that we consider critical in preparing our consolidated financial statements. These policies include significant estimates made~~ by ~~management~~type ~~using~~of ~~information~~customer ~~available~~and atdistribution ~~the time the estimates were made~~method. ~~However, these estimates could change materially if different~~ ~~information or assumptions were used.~~

33Route revenues — Our route revenues accounted for 85.7% and 86.1% of our net sales for the twelve weeks ended, and 86.1% and 86.5% for the twenty-four weeks ended, November 15, 2008 and November 17, 2007, respectively, and consists of an aggregation of our operations that manufacture, distribute, and sell fresh baked goods utilizing our direct store delivery system.

~~RESULTS~~Outlet OFrevenues ~~OPERATIONS~~— Our outlet revenues generated approximately 10.8% and 10.6% of our net sales for the twelve weeks ended, and 10.9% and 10.7% for the twenty-four weeks ended, November 15, 2008 and November 17, 2007, respectively, and consists of four regions that sell our baked goods and other food items directly to consumers through company-operated outlet locations.

~~The~~Direct ~~following~~revenues ~~table~~— ~~sets~~Our ~~forth~~direct revenues generated approximately 3.5% and 3.3% of our net sales for the ~~relative~~twelve ~~percentages~~weeks ~~that~~ended, ~~certain~~and ~~income~~3.0% and ~~expense~~2.8% ~~items~~for ~~bear to~~the ~~net~~twenty-four ~~sales:~~week s ended, November 15, 2008 and November 17, 2007,

	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 17,			November 18,			November 17,			November 18,
	2007			2006			2007			2006
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of products sold (exclusive of items shown below)		50.9			51.7			50.3			51.6
Selling, delivery and administrative expenses		48.0			47.4			47.3			47.3
Restructuring (credits) charges		1.2			(0.6	)		0.6			(0.3	)
Depreciation and amortization		2.4			2.4			2.3			2.4
Loss on sale or abandonment of assets		0.1			0.1			—			0.1
Property and equipment impairment		—			—			0.7			—
Operating loss		(2.6	)		(1.0	)		(1.2	)		(1.1	)
Interest expense		1.8			1.7			1.7			1.8
Reorganization charges		1.8			1.5			1.4			1.2
Other income		—			(0.2	)		—			(0.1	)
Loss before income taxes		(6.2	)		(4.0	)		(4.3	)		(4.0	)
Income taxes		(0.1	)		(0.1	)		(0.2	)		(0.1	)
Net loss		(6.1	)%		(3.9	)%		(4.1	)		(3.9	)%

NetTable Sales of Contents

~~(dollars~~respectively, inand ~~thousands)~~consists of our direct warehouse shipment program, which ships bulk packaged sweet goods and dry products, such as croutons and stuffing mix, directly to customer-owned distribution centers and public warehouses for distribution.

	Twelve Weeks Ended													Twenty-four Weeks Ended
											%													%
	November 17,					November 18,					Increase /			November 17,					November 18,					Increase /
	2007		%			2006		%			(Decrease)			2007		%			2006		%			(Decrease)
Route sales	$	555,257		86.1	%	$	581,775		86.6	%		(4.6	)%	$	1,154,537		86.5	%	$	1,178,106		86.9	%		(2.0	)%
Outlet sales		68,232		10.6			75,676		11.2			(9.8	)		142,302		10.7			154,876		11.4			(8.1	)
Direct sales		21,627		3.3			14,462		2.2			49.5			38,093		2.8			23,176		1.7			64.4
Total net sales	$	645,116		100.0	%	$	671,913		100.0	%		(4.0	)%	$	1,334,932		100.0	%	$	1,356,158		100.0	%		(1.6	)%

Our management evaluates reportable segment performance based on profit or loss from operations before other income, interest expense, and income taxes. Because of our integrated business structure, operating costs often benefit all reportable segments and must be allocated between segments. However, we do not identify or allocate fixed assets and the related depreciation and capital expenditures for long-lived assets by reportable segment and we transfer fresh goods between segments at cost without recognizing intersegment sales on these transfers. Intersegment transfers of products at cost from the route revenues segment to the outlet revenues segment aggregated approximately $21.9 million and $20.5 million for the twelve weeks ended, and $46.6 million and $43.2 million for the twenty-four weeks ended, November 15, 2008 and November 17, 2007, respectively. Intersegment transfers of products at cost from the route revenues segment to the direct revenues segment aggregated approximately $12.1 million and $11.6 million for the twelve weeks ended, and $25.0 million and $22.4 million for the twenty-four weeks ended, November 15, 2008 and November 17, 2007, respectively.

~~Reportable~~The ~~Segments~~measurement of reportable segment results is generally consistent with the presentation of the consolidated statement of operations.

We initiated changes in our reporting system effective for the beginning of fiscal 2008, which resulted in the identification of three distinct reportable segments. The three reportable segments were determined by type of customer and distribution method. Management continues to maintain the wholesale operations and retail operations as reporting segments, but renamed them as route sales and outlet sales, respectively. The third reporting segment, direct sales, was established by segregating certain operations previously within wholesale operations that deliver products exclusively through warehouse channels. Our reportable segments are strategic business units that are managed separately using different distribution and marketing strategies.


	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 15,			November 17,			November 15,			November 17,
	2008			2007			2008			2007
	*(dollars in thousands)*
Net Revenues

Route revenues	$	552,136		$	555,257		$	1,122,086		$	1,154,537
Outlet revenues		69,256			68,232			141,548			142,302
Direct revenues		22,539			21,627			39,006			38,093


Total net revenues	$	643,931		$	645,116		$	1,302,640		$	1,334,932


Segment Profit (Loss)

Route profit (loss)	$	13,038		$	6,401		$	5,039		$	29,658
Outlet profit (loss)		5,431			5,232			11,048			12,440
Direct profit (loss)		2,678			2,275			3,470			3,748


Total segment profit (loss)		21,147			13,908			19,557			45,846
Corporate		(17,291	)		(30,654	)		(33,562	)		(62,856	)


Total operating profit (loss)		3,856			(16,746	)		(14,005	)		(17,010	)

Interest expense		14,444			11,263			27,902			22,283
Reorganization charges		34,083			11,707			40,109			18,905
Other (income) expense		109			128			62			74


		48,636			23,098			68,073			41,262


Income (loss) before income taxes		(44,780	)		(39,844	)		(82,078	)		(58,272	)
Provision (benefit) for income taxes		(3,360	)		(683	)		(3,792	)		(3,118	)


Net income (loss)	$	(41,420	)	$	(39,161	)	$	(78,286	)	$	(55,154	)

~~Our~~20. ~~route~~Subsequent ~~sales, formerly wholesale operations, consist of an aggregation of our operations that~~Events ~~manufacture, distribute, and sell fresh baked goods utilizing our direct store delivery system.~~

~~Our~~See ~~outlet~~Note ~~sales,~~1. ~~formerly~~Voluntary ~~retail~~Chapter 11 ~~operations,~~Filing ~~consist~~to ofthese ~~five~~consolidated ~~regions~~financial ~~that~~statements ~~sell~~regarding ~~our baked goods and~~the ~~other~~status ~~food~~of ~~items~~our ~~directly~~bankruptcy ~~to consumers through company-operated outlet locations~~proceedings.

~~Our direct sales consist of our direct warehouse shipment program, which ships bulk packaged sweet~~29 ~~goods and dry products, such as croutons and stuffing mix, directly to customer-owned distribution centers and public warehouses for distribution.~~

34 Table of Contents

~~Consolidated~~Item 2. ~~Net~~Management’s ~~Sales~~Discussion and Analysis of Financial Condition and Results of Operations

~~Net~~This ~~sales~~discussion ~~for~~should ~~the~~be ~~second~~read ~~quarter~~in ofconjunction ~~fiscal~~with ~~2008~~our consolidated financial statements, ~~the~~notes, and ~~twelve~~tables ~~weeks~~included ~~ended~~elsewhere ~~November 17,~~in ~~2007~~this report, ~~were~~as well as the more detailed Management’s Discussion ~~approximately~~and ~~$645.1 million,~~Analysis aof ~~decrease~~Financial Condition and Results of ~~approximately~~Operations ~~$26.8 million~~, or ~~4.0%~~MD&A, ~~from~~contained ~~net~~in ~~sales~~our of2008 ~~approximately~~Annual ~~$671.9 million~~Report inon ~~the~~Form ~~same~~10-K. ~~period~~This inMD&A ~~fiscal~~may ~~2007.~~contain ~~Year~~forward-~~to-date~~looking ~~net~~statements ~~sales~~that ~~for~~are ~~fiscal~~provided to ~~2008~~assist ~~decreased~~in ~~approximately~~the ~~$21.3 million,~~understanding orof ~~1.6%,~~anticipated tofuture ~~approximately~~financial ~~$1,334~~performance.~~9 million~~ However, ~~from net~~future ~~sales~~performance ofinvolves ~~approximately~~risks $1and uncertainties,~~356.2 million~~ ~~for~~which ~~the~~may ~~same~~cause ~~period~~actual results to differ materially from those expressed in ~~fiscal~~the ~~2007~~forward-looking statements. See Forward-Looking Statements for further information.

~~Route~~COMPANY ~~net sales. Route net sales for the second quarter of fiscal 2008 were approximately $555.3~~OVERVIEW million, a decrease of approximately $26.5 million, or 4.6%, from net sales of approximately $581.8 million in the second quarter of fiscal 2007. Year-to-date route net sales for fiscal 2008 decreased approximately $23.6 million, or 2.0%, to approximately $1,154.5 million from net sales of approximately $1,178.1 million for the same period in fiscal 2007. On October 20, 2007, we exited the bread market in our Southern California market area. Included in our reduction in sales for the quarter and year-to-date ended November 17, 2007, as compared to the same periods in fiscal 2007, is a reduction in sales of approximately $11.0 million which reflects this exit of the bread market in Southern California. The decrease in net sales for the second quarter and year-to-date of fiscal 2008 reflected unit volume declines for the quarter and year-to-date for fiscal 2008 of approximately 10.0% and 7.3%, as compared to the same periods in the prior year. Adjusted for the effect of our Southern California restructuring, our unit volume declines for the quarter and year-to-date were 8.8% and 6.7%, respectively. Our sales decreases also were the result of reduced demand for our products principally related to price increases, depth and frequency of our promotional activities, and the effects of a highly competitive market. These decreases were partially offset by an overall unit value increase for the quarter and year-to-date related to our strategic price increases and product mix changes of approximately 7.2% and 7.1%, respectively, when compared to the same periods of the prior year.

~~Outlet~~Interstate ~~net~~Bakeries ~~sales.~~Corporation ~~Outlet~~is ~~net~~one ~~sales~~of ~~for~~ the ~~second~~largest ~~quarter~~wholesale ofbakers ~~fiscal~~and ~~2008~~distributors ~~were~~of ~~approximately $68.2~~fresh ~~million,~~baked abread ~~decrease~~and ofsweet ~~approximately~~goods ~~$7.5 million,~~in orthe ~~9.8%~~United States, ~~from~~producing, ~~net~~marketing, ~~sales~~distributing ofand ~~approximately~~selling ~~$75.7~~a ~~million~~wide ~~when~~range ~~compared~~of tobreads, ~~the~~rolls, ~~same~~croutons, ~~period~~snack incakes, ~~fiscal~~donuts, ~~2007.~~sweet ~~Year-to-date~~rolls ~~outlet~~and ~~net~~related ~~sales~~products. ~~for fiscal~~Our ~~2008~~various ~~decreased~~brands ~~approximately~~are ~~$12.6 million~~positioned oracross ~~8.1%,~~a towide ~~approximately~~spectrum ~~$142.3 million from outlet net sales~~ of ~~approximately~~consumer ~~$154.9 million~~categories ~~when~~and ~~compared~~price ~~to the same period in fiscal 2007~~points. ~~The decline~~We incurrently ~~revenue~~operate ~~for~~41 ~~both~~bakeries ~~periods~~and isover ~~attributable~~700 tobakery ~~the closing of retail~~ outlets inlocated ~~conjunction with our restructuring efforts and a decrease~~ in ~~same~~strategic ~~store~~markets ~~sales related to the effects of retail price~~throughout ~~increases for~~ the ~~second~~United ~~quarter~~States. ~~and~~Our ~~year-to-date~~sales offorce ~~2.3%~~delivers ~~and~~baked ~~1.3%,~~goods ~~respectively~~from ~~when~~approximately ~~compared~~600 todistribution ~~the~~centers ~~same~~on ~~periods~~over of5,800 ~~the~~delivery ~~prior year~~routes.

~~Direct~~RECENT ~~net sales. Direct net sales for the second quarter of fiscal 2008 were approximately $21.6~~DEVELOPMENTS million, an increase of approximately $7.2 million, or 49.5%, from net sales of approximately $14.4 million for the same period in fiscal 2007. The year-to-date direct net sales for fiscal 2008 increased approximately $14.9 million, or 64.4%, to approximately $38.1 million from direct net sales of approximately $23.2 million when compared to the same period of the previous year. This increase in sales for both periods is primarily attributable to an increase in direct sales of our sweet goods.

~~Gross~~On ~~Profit~~December 5, 2008, the United States Bankruptcy Court for the Western District of Missouri (~~exclusive~~the “ Bankruptcy Court “) entered an order confirming the Amended Joint Plan of ~~depreciation~~Reorganization of the Company and ~~amortization~~its Affiliated Debtors and Debtors-in-Possession dated October 31, 2008 (as amended, the “ Plan “). The exit financings that form the basis for the Plan are reflected in certain debt and equity commitments including: (i) that certain equity commitment letter, as amended, entered into on September 12, 2008, between the Company and IBC Investors I, LLC (“Investors”) pursuant to which Investors agrees to provide $130 million of new capital to the reorganized IBC; (ii) that certain commitment letter, as amended, entered into on September 12, 2008, among the Company, General Electric Capital Corporation (“GECC”) and GE Capital Markets, Inc. (“GECM;” and together with GECC, “GE”) pursuant to which GE commits, on the terms and conditions specified therein, to provide a $125 million working capital senior secured revolving credit facility; (iii) that certain commitment letter, as amended, entered into on September 12, 2008, among the Company, Silver Point Finance, LLC (“Silver Point”) and Monarch Master Funding Ltd (“Monarch” and together with Silver Point, the “NMTL Lenders”) pursuant to which the NMTL Lenders commit, on the terms and conditions specified therein, to provide a $344 million first lien term loan credit facility.

~~Gross~~Under ~~profit~~the ~~was~~terms ~~approximately~~of ~~$316.6 million~~the Plan, orwe 49cannot emerge from Chapter 11 until these exit financings are consummated.1% ofSince ~~net~~the ~~sales~~Plan was confirmed, we have focused our efforts on negotiating and finalizing all documentation for these exit financings and satisfying the ~~second~~remaining ~~quarter~~conditions precedent to closing of ~~fiscal~~ ~~2008,~~the invarious ~~comparison~~transactions ~~with~~contemplated ~~approximately~~under ~~$324.4 million~~the Plan, orincluding 48the debt and equity financing commitments.3% ofAlthough ~~net~~progress ~~sales~~has been made, ~~for~~significant ~~the~~issues ~~same~~remain to be ~~period~~resolved, inincluding ~~fiscal~~with ~~2007.~~respect ~~Year-~~to~~-date~~ ~~gross~~the ~~profit~~exit ~~was~~financings ~~approximately~~and ~~$663.2 million~~conditions orprecedent 49to funding under the various commitments.7% ofNo ~~net~~assurance can be given that the exit financings will be closed and ~~sales~~that the Plan will become effective. Further, in ~~comparison~~the ~~with~~event ~~approximately~~that ~~$656.5 million~~one or ~~48.4%~~more of ~~net~~the ~~sales~~parties committed to provide the exit financing refuse or fail to perform under their respective commitments, ~~for~~we may seek to enforce our rights under the ~~same~~financing ~~period~~commitments or seek to replace inany ~~fiscal~~such ~~2007~~financing or financings. There can be no assurance that any attempt to enforce the commitments or to obtain replacement financing will be successful.

~~Total~~In ~~gross~~the ~~margin~~event ~~for~~that ~~the~~our ~~second~~Plan ~~quarter~~does ofnot ~~fiscal~~become ~~2008~~effective, ~~increased~~we ~~0.8%~~will ofcontinue ~~net~~our ~~sales~~efforts ~~compared~~ to maximize the value of the ~~same~~bankruptcy ~~period~~estates, inwhich ~~fiscal~~may ~~2007.~~include, Webut ~~improved~~not ~~our~~be ~~margins~~limited byto, ~~means~~the sale of ~~our~~the ~~strategic pricing~~Company ~~structure,~~or ~~including~~some ~~price~~or ~~increases~~all ~~and~~of ~~improved~~our ~~route returns~~assets, ~~which~~infusion ~~were~~of ~~partially~~capital, ~~offset~~debt byrestructuring ~~the effect~~or ofany ~~unfavorable~~combination ~~increases~~of inthese options. ~~direct~~There ~~component~~can ~~costs~~be ~~per~~no ~~pound~~assurance ofas ~~production.~~to Onwhether awe ~~cost~~will ~~per pound~~be ~~basis,~~able ~~direct~~to ~~component~~successfully ~~costs~~implement ~~per~~any ~~pound~~such strategy ~~increased~~on ~~approximately~~terms ~~8.2%~~and ~~when~~conditions ~~compared~~acceptable to ~~fiscal 2007.~~us ~~These~~or ~~direct~~to ~~component~~our ~~costs,~~various ~~when~~constituents ~~compared~~in onthe abankruptcy, and ~~cost~~absent ~~per~~the ~~pound~~ability ofto ~~production~~pursue ~~with~~such ~~fiscal 2007~~a strategy, ~~increased~~we ~~4.9%~~expect ~~for~~to ~~ingredients,~~begin ~~0.7%~~an ~~for~~orderly ~~packaging,~~wind-down ~~and~~of 2our operations.6% ~~for~~There ~~labor.~~can ~~Overhead~~be ~~and administrative~~no ~~costs~~assurance as ato ~~percent~~the ofultimate ~~net~~recovery ~~sales~~of ~~remained~~value ~~constant~~available ~~when~~to ~~compared~~our constituents toshould ~~the~~our ~~same~~Plan ~~period in~~not ~~fiscal~~be ~~2007~~consummated.

3530

TotalTable year-to-date gross margin increased 1.3% of net sales when compared to the same period in fiscal 2007. We improved our margins by means of our strategic pricing structure, including price increases and improved route returns, which were offset partially by the effect of unfavorable increases in overhead and administrative costs as a percentage of net sales and the increase in direct component costs per pound of production. On a cost per pound basis, direct component costs per pound increased approximately 6.9% when compared to fiscal 2007. These direct component costs, when compared on a cost per pound of production with fiscal 2007, increased 4.0% for ingredients, 0.6% for packaging, and 2.3% for labor. Overhead and administrative costs as a percent of net sales increased approximately 0.1% when compared to the same period in fiscal 2007. Contents

~~Selling,~~CRITICAL ~~Delivery~~ACCOUNTING ~~and Administrative Expenses~~POLICIES

~~Selling,~~Refer ~~delivery~~to ~~and~~Critical ~~administrative~~Accounting ~~expenses~~Policies ~~were~~in ~~approximately~~our ~~$310.2 million,~~2008 ~~representing~~Annual ~~48.0% of~~Report ~~net~~on ~~sales,~~Form 10-K for ~~the~~information ~~second quarter of fiscal 2008 down from approximately $318.7 million, or~~on ~~47.4%~~accounting ofpolicies ~~net~~that ~~sales,~~we ~~when~~consider ~~compared~~critical ~~with~~in ~~the~~preparing ~~same~~our ~~period~~consolidated infinancial ~~fiscal 2007~~statements. ~~Year-to-date selling,~~ ~~delivery~~These ~~and~~policies ~~administrative~~include ~~expenses~~significant ~~for~~estimates ~~fiscal~~made ~~2008~~by ~~amounted~~management tousing ~~approximately~~information ~~$631.2 million,~~available orat the ~~47.3%~~time ofthe ~~net~~estimates ~~sales,~~were ~~decreasing from approximately $641~~made.~~4 million~~ However, orthese ~~47.3%~~estimates ofcould ~~net~~change ~~sales,~~materially ~~for~~if ~~the~~different ~~same~~information ~~period~~or inassumptions ~~the~~were ~~prior year~~used.

~~For~~RESULTS ~~the~~OF ~~second quarter of fiscal 2008, the increase in selling, delivery and administrative~~OPERATIONS ~~expenses as a percent of net sales was 0.6% when compared to the same period of the previous year.~~ ~~Our~~The ~~corporate~~following ~~administrative~~table ~~costs~~sets asforth a percent of net sales increased 0.3% principally as a result of incentive accruals and increased professional and consultant fees. As a percent of net sales, delivery and distribution costs and labor and related costs increased 0.2% and 0.3%, respectively, as compared to the ~~second~~relative ~~quarter~~percentages ofthat ~~the~~certain ~~prior~~income ~~year. These percentage increases reflect the effect of a slower rationalization of selling~~ and ~~delivery~~expense ~~costs,~~items ~~including labor in the exit of the~~bear ~~Southern California bread market as compared~~ to ~~the reduction in~~ net ~~sales. Additionally, energy,~~revenues: ~~and facility costs each increased by 0.1%. Taxes and licenses as a percent of net sales decreased~~ ~~by 0.2% principally resulting from the reduction in routes, the related vehicle licensing, and real estate and other taxes associated with our reduction in outlets and depots.~~

On a year-to-date basis, selling, delivery and administrative expenses as a percent of net sales were 47.3% for both fiscal 2008 and the same period in fiscal 2007. Our labor and labor-related costs as a percent of net sales decreased 0.2% principally related to reduced labor expense from the closure of outlet locations and decreased over-the-road transportation labor resulting from reduced volumes and distribution efficiencies partially offset by the effect of the second quarter Southern California restructuring. Additionally, as a percent of net sales, taxes and licenses also decreased by 0.2% principally resulting from the reduction in routes, the related vehicle licensing, and real estate and other taxes associated with our reduction in depots. Corporate administrative costs as a percent of net sales increased by 0.2% principally as a result of incentive accruals and increased professional and consultant fees. Additionally, facility and all other costs combined each increased by 0.1% as a percent of net sales.


	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 15,			November 17,			November 15,			November 17,
	2008			2007			2008			2007
Net revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of products sold (exclusive of items shown below)		51.9			50.9			53.1			50.3
Selling, delivery and administrative expenses		45.5			48.0			46.3			47.3
Restructuring charges (credits)		(0.2	)		1.2			(0.5	)		0.6
Depreciation and amortization		2.1			2.4			2.1			2.3
Loss on sale or abandonment of assets		0.1			0.1			0.1			—
Property and equipment impairment		—			—			—			0.7


Operating profit (loss)		0.6			(2.6	)		(1.1	)		(1.2	)
Interest expense		2.2			1.8			2.1			1.7
Reorganization charges		5.3			1.8			3.1			1.4
Other (income) expense		—			—			—			—


Income (loss) before income taxes		(6.9	)		(6.2	)		(6.3	)		(4.3	)
Provision (benefit) for income taxes		(0.5	)		(0.1	)		(0.3	)		(0.2	)


Net income (loss)		(6.4	)%		(6.1	)%		(6.0	)%		(4.1	)%

~~Restructuring~~Net ~~Charges (Credits)~~Revenues

~~During~~(dollars ~~the second quarter of fiscal 2008, we incurred net restructuring charges of approximately $7.9 million related principally to the Southern California and sales restructuring plans initiated~~ in ~~fiscal 2008 as compared to net restructuring credits of approximately $4.2 million for the same~~thousands) ~~period in fiscal 2007. Year-to-date, we incurred net restructuring charges of approximately $7.9~~ ~~million as compared to net restructuring credits of approximately $3.7 million for the same period of the prior year.~~

The net restructuring charges in the second quarter of fiscal 2008 included net gains on sale of real estate of approximately $0.4 million, additional exit costs related to relocation, taxes, security, utilities and cleanup of assets held for sale of approximately $0.7 million and severance costs and related benefits of approximately $7.6 million which was principally related to the exit of the bread market in Southern California and our sales restructuring activities as compared to gains on sale of real estate of approximately $4.7 million and exit costs related to relocation, taxes, security, utilities and cleanup of assets held for sale of approximately $0.5 million for the same period of the prior year.


	Twelve Weeks Ended													Twenty-four Weeks Ended
											%													%
	November 15,					November 17,					Increase /			November 15,					November 17,					Increase /
	2008		%			2007		%			(Decrease)			2008		%			2007		%			(Decrease)
Route revenues	$	552,136		85.7	%	$	555,257		86.1	%		(0.6	)%	$	1,122,086		86.1	%	$	1,154,537		86.5	%		(2.8	)%
Outlet revenues		69,256		10.8			68,232		10.6			1.5			141,548		10.9			142,302		10.7			(0.5	)
Direct revenues		22,539		3.5			21,627		3.3			4.2			39,006		3.0			38,093		2.8			2.4


Total net revenues	$	643,931		100.0	%	$	645,116		100.0	%		(0.2	)%	$	1,302,640		100.0	%	$	1,334,932		100.0	%		(2.4	)%

36Consolidated Net Revenues

~~The~~Net ~~net~~revenues ~~restructuring~~for ~~charges~~the ~~year-to-date~~second ~~included~~quarter ~~net gains on sale~~ of ~~real~~fiscal ~~estate~~2009 of were approximately $0643.59 million, ~~additional~~a ~~exit~~decrease ~~costs related to relocation, taxes, security, utilities and cleanup~~ of ~~assets held for sale of $0.8 million and severance costs of approximately $7.6~~ ~~million which was principally related to the exit of the bread market in Southern California as compared to gains on sale of real estate of~~ approximately $51.2 million, ~~additional~~or ~~exit costs related to relocation, taxes, security, utilities and cleanup of assets held for sale of $1~~0.2 ~~million~~%, ~~and~~from ~~severance~~net ~~costs~~revenues of approximately $0645.31 million ~~for~~in the same period ofin ~~the~~fiscal ~~prior year~~2008. Year-

~~Property and Equipment Impairment~~31

WeTable realized a net credit to property and equipment impairment of approximately $0.4 million for the quarter ended November 17, 2007 and year-to-date net charges for fiscal 2008 of approximately $9.8 million. There was no property and equipment impairment for either of the comparable periods in fiscal 2007. Contents

On October 20, 2007, we exited the bread market in Southern California. This action entailed the closure of four bakeries and the consolidation of routes and distribution centers. At August 25, 2007, based upon our intention to ~~pursue this plan of action and our expectation of the disposal of the related assets, we tested the related long~~-~~lived~~date ~~assets~~net ~~for~~revenues ~~recoverability using a probability-weighted approach~~ for ~~continued~~fiscal ~~use~~2009 ordecreased ~~disposal of certain assets and recorded an impairment of~~ approximately $1032.23 million, inor ~~the first quarter of fiscal 2008~~2.4%, ~~During the second~~to ~~quarter~~approximately ~~of fiscal 2008~~$1,302.6 million, ~~final~~from ~~determination was made concerning the continued use or disposal of certain assets which resulted in a~~ net ~~valuation~~revenues ~~credit adjustment~~ of approximately $01,334.49 million to for the ~~initial~~same period ~~impairment~~in ~~charge~~fiscal 2008.

~~Operating~~Route ~~Loss~~net revenues. Route net revenues for the second quarter of fiscal 2009 were approximately $552.1 million, a decrease of approximately $3.2 million, or 0.6%, from net revenues of approximately $555.3 million in the same period in fiscal 2008. Year-to-date route net revenues for fiscal 2009 decreased approximately $32.5 million, or 2.8%, to approximately $1,122.1 million from route net revenues of approximately $1,154.5 million for the same period in fiscal 2008. After adjustment for our exit from the bread market in Southern California during the second quarter of fiscal 2008, we experienced increases in route net revenues for the quarter and year-to-date of $12.6 million and $14.6 million, respectively, when compared to the same periods in the prior year.

~~(dollars~~These adjusted route net revenue increases for the quarter and year-to date reflect declines in ~~thousands)~~net pounds of product sold of approximately 7.9% and 8.7%, respectively, when compared to the same periods in fiscal 2008. This decline in net pounds of product sold is the result of reduced demand for our products principally from price increases, changes in the depth and frequency of our promotional activities, and market actions by our competitors. These decreases were more than offset by an overall revenue per pound increase for the quarter and year-to-date related to our strategic price increases and product mix changes, which together totaled approximately 11.1% and 10.9%, respectively, when compared to the same periods in fiscal 2008.

	Twelve Weeks Ended												Twenty-four Weeks Ended
	November 17,						November 18,						November 17,						November 18,
	2007			%			2006			%			2007			%			2006			%
Segment Income
Route sales	$	6,401			(38.2	)%		5,481			(81.2	)%		29,658			(174.4	)%		12,595			(86.8	)%
Outlet sales		5,232			(31.2	)		2,164			(32.1	)		12,440			(73.1	)		5,001			(34.5	)
Direct sales		2,275			(13.6	)		1,675			(24.8	)		3,748			(22.0	)		2,192			(15.1	)
Total segment income		13,908			(83.0	)		9,320			(138.1	)		45,846			(269.5	)		19,788			(136.4	)
Corporate		(30,654	)		183.0			(16,071	)		238.1			(62,856	)		369.5			(34,298	)		236.4
Total operating loss		(16,746	)		100.0	%		(6,751	)		100.0	%		(17,010	)		100.0	%		(14,510	)		100.0	%

Outlet net revenues. Outlet net revenues for the second quarter of fiscal 2009 were approximately $69.3 million, an increase of approximately $1.1 million, or 1.5%, from net revenues of approximately $68.2 million when compared to the same period in fiscal 2008. Year-to-date outlet net revenues for fiscal 2009 decreased approximately $0.8 million, or 0.5%, to approximately $141.5 million from net outlet revenues of approximately $142.3 million for the same period in fiscal 2008. The increase in outlet net revenues for the second quarter was attributable to an increase in same store net revenues of approximately 4.6% primarily due to retail price increases when compared to the same period of the prior year. The decrease in outlet net revenues year-to-date resulted from the closing of retail outlets in conjunction with our restructuring efforts in the first quarter of fiscal 2008, which was partially offset by an increase in same store net revenues of approximately 3.8% primarily due to retail price increases when compared to the same period of the prior year.

~~Consolidated~~Direct ~~Operating~~net ~~Loss~~revenues. Direct net revenues for the second quarter of fiscal 2009 were approximately $22.5 million, an increase of approximately $0.9 million, or 4.2%, from direct net revenues of approximately $21.6 million when compared to the same period in fiscal 2008. Year-to-date direct net revenues for fiscal 2009 also increased approximately $0.9 million, or 2.4%, to approximately $39.0 million from direct net revenues of approximately $38.1 million for the same period in fiscal 2008. Unit volume declines in our direct business operations have been offset by price increases when comparing the same periods of fiscal 2009 and fiscal 2008.

~~Based~~Gross ~~upon~~Profit ~~the~~(exclusive ~~above factors, the operating loss for the second quarter~~ of ~~fiscal~~depreciation 2008 was approximately $16.7 million, an increase of approximately $9.9 million from the prior year’s operating loss of approximately $6.8 million. Our operating loss for the second quarter of fiscal 2008 included a net charge to operations of approximately $7.9 million for restructuring activities. Restructuring activities for the same period in the previous year resulted in a net credit of approximately $4.2 million. Our fiscal 2008 year-to-date operating loss was approximately $17.0 million, an increase of approximately $2.5 million from the same period in the prior year of approximately $14.5 million. Our year-to-date operating loss for fiscal 2008 included a net charge to operations of approximately $17.7 million for restructuring activities and ~~property~~ ~~and equipment impairment. Similar charges for the same period of the previous year were a~~amortization) ~~net credit of approximately $3.7 million.~~

37Gross profit was approximately $309.3 million, or 48.0% of net revenues, for the second quarter of fiscal 2009, in comparison with approximately $316.6 million, or 49.1% of net revenues, for the same period in fiscal 2008. Year-to-date gross profit was approximately $611.9 million, or 47.0% of net revenues, in comparison with approximately $663.2 million, or 49.7% of net revenues, for the same period in fiscal 2008.

~~Route~~We ~~operating~~experienced ~~income.~~sharp ~~Route~~increases ~~operating~~in ~~income~~our ~~for~~commodity ~~the~~costs, ~~second~~as ~~quarter~~well ofas ~~fiscal~~our ~~2008~~other ~~was approximately~~components ~~$6.4 million representing an increase~~ of ~~approximately $0.9 million from route~~ ~~operating~~production, ~~income of approximately $5.5 million~~ in the second quarter of fiscal ~~2007.~~2009 ~~The~~compared ~~second quarter increase in route operating income was attributable~~ to athe ~~decrease~~same ofperiod ~~approximately~~in ~~$27~~fiscal 2008.4 These ~~million~~direct incomponent ~~route operating~~ costs, ~~partially~~when ~~offset~~compared byon a ~~decrease~~cost inper ~~route~~pound ~~sales~~ of ~~approximately $26~~production, increased 17.5 ~~million~~% ~~when~~ compared to the same period in ~~the previous year. On a year-to-date basis, route operating income for~~ fiscal 2008, ~~was~~including ~~approximately~~increases ~~$29.7 million representing an increase~~ of ~~approximately~~ ~~$17~~15.~~1 million~~2% ~~from~~for aningredients, ~~operating income of approximately $12~~1.~~6 million~~1% for ~~the same~~packaging ~~period~~and of1.2% ~~the~~for ~~prior year~~labor. ~~The fiscal 2008 year~~Year-to-date ~~increase~~these indirect ~~route~~component ~~operating~~costs, ~~income~~when ~~was attributable~~compared toon a ~~decrease~~cost per pound of ~~approximately~~production, ~~$40~~increased 21.6 ~~million~~% incompared ~~route~~to ~~operating~~the ~~costs~~same ~~partially~~period ~~offset by~~in afiscal ~~decrease~~2008, ofincluding ~~approximately~~increases ~~$23~~of 18.~~5 million~~7% infor ~~route~~ingredients, ~~sales~~1.3% ~~when~~for ~~compared~~packaging toand ~~the~~1.6% ~~same~~for ~~period in the prior year~~labor.

~~Outlet~~These ~~operating~~cost ~~income.~~increases ~~Outlet~~were ~~operating~~only ~~income~~partially ~~for~~offset by the ~~second~~following: ~~quarter~~(1) effects of ~~fiscal~~our ~~2008 was~~strategic ~~approximately~~pricing ~~$5.~~actions, (2) ~~million~~improved ~~representing~~levels ~~an increase~~ of ~~approximately~~product $returns, (3.0) ~~million~~decreased ~~from~~distribution ~~outlet operating income~~ of ~~approximately~~lower ~~$2.2 million in the second quarter of fiscal 2007. The second~~margin ~~quarter~~products, ~~increase~~and in(4) cost ~~outlet~~declines ~~operating~~due ~~income was attributable~~ to aour ~~decrease~~bakery ofand ~~approximately~~outlet ~~$10~~closings.~~4 million~~ inThe ~~outlet~~net ~~operating~~effect ~~costs partially offset by a decrease in outlet sales~~ of ~~approximately~~these ~~$7.4 million~~changes ~~when~~resulted ~~compared to the same period~~ in ~~the previous year. On~~ a ~~year-to-date~~decrease ~~basis, outlet~~in ~~operating~~our ~~income~~gross ~~for~~profit ~~fiscal~~margin ~~2008~~percentage ~~was approximately $12.4 million representing an increase of approximately $7.4 million from an operating income of approximately $5.0 million~~ for the ~~same period~~quarter ~~of the prior~~ and year~~. The fiscal 2008 year~~-to-date ~~increase in outlet operating income was attributable to a decrease~~ of ~~approximately $20~~1.~~0 million~~1% inand ~~outlet operating costs partially offset by a decrease of approximately $12~~2.~~6 million~~7%, inrespectively, ~~outlet sales~~ when compared to the same ~~period~~ periods in ~~the~~fiscal ~~prior year~~2008.

~~Direct operating income. Direct operating income for the second quarter of fiscal 2008 was~~32 approximately $2.3 million representing an improvement of approximately $0.6 million from operating income of approximately $1.7 million in the second quarter of fiscal 2007. The increase in direct operating income for the quarter was attributable to an increase in sales of approximately $7.2 million partially offset by an increase in operating costs of approximately $6.6 million when compared to the same period of the prior year. On a year-to-date basis, direct operating income for fiscal 2008 was approximately $3.7 million representing an improvement of approximately $1.5 million from operating income of approximately $2.2 million for the same period of the prior year. The fiscal 2008 year-to-date increase in direct operating income was attributable to an increase in direct sales of approximately $14.9 million partially offset by an increase in operating costs of approximately $13.4 million.

ReorganizationTable Charges of Contents

~~For the quarter ended November 17~~Selling, ~~2007,~~Delivery reorganization charges relating to expense or income items that we incurred under our bankruptcy proceedings were approximately $11.7 million. The cost of these activities includes (1) professional fees and ~~similar~~Administrative ~~types of expenses related to the~~Expenses Chapter 11 proceedings of approximately $12.4 million; (2) lease rejection charges of $0.1 million; (3) interest income of approximately $0.6 million; and (4) credits of approximately $0.2 million resulting from gains realized on asset sales.

~~Reorganization~~Selling, ~~charges~~delivery ~~for~~and ~~the~~administrative ~~quarter~~expenses ~~ended November 18, 2006~~ were approximately $10292.17 million ~~including~~, ~~approximately~~or ~~(1) $10~~45.5 ~~million~~% of ~~professional~~net revenues, ~~fees;~~for ~~(2)~~the second quarter of fiscal 2009 decreasing from approximately $0310.42 million, or 48.1% of net revenues, in ~~payroll~~the ~~related charges~~same period in fiscal 2008. Year-to-date ~~retain~~selling ~~key~~delivery ~~employees~~and administrative ~~during~~expense ~~our~~for ~~reorganization;~~fiscal ~~(3)~~2009 amounted to approximately $0603.56 million, ofor ~~interest~~46.3% ~~income;~~of ~~and~~net ~~(4)~~revenues, decreasing from approximately $0631.32 million, ~~gain~~or ~~realized~~47.3% onof net revenues, for the ~~sale~~same period ofin ~~assets~~fiscal 2008.

~~Second~~For the second quarter of fiscal 2009, the decrease in selling, delivery and administrative expenses as a percent of net revenues was 2.6% when compared to the same period of the previous year-. Contributing to~~-date~~ ~~reorganization~~this ~~charges~~improvement, ~~for~~we ~~fiscal~~had ~~2008~~a ~~were~~actuarial ~~approximately~~gain ~~$18~~associated with the ABA Plan, which resulted in a credit to benefit plan expense in the second quarter of fiscal 2009 of 1.~~9 million~~7% as a percent of net revenues. We also experienced a decrease in our labor and ~~included~~fringe, ~~(1) professional~~corporate ~~fees~~costs and advertising costs of ~~approximately~~1.2%, ~~$20~~0.5% and 0 ~~million;~~.1%, ~~(2)~~ respectively, as a ~~credit~~percent ~~for~~of annet ~~accrual~~revenues. The ~~adjustment~~reduction in labor and fringe costs for ~~employee~~the ~~retention~~quarter ~~expense~~as compared to the same period in the prior year reflected our exit from bread operations in Southern California and our route reduction efforts. The reduction in our corporate costs relates to, among other things, the elimination of the ~~approximately~~incentive $bonus accrual, a reduction in certain professional fees and a decrease in corporate staff. These cost savings were partially offset by an increase in energy costs of 0.~~2 million;~~4% ~~(3) lease~~as ~~rejection~~a ~~charges~~percent of ~~approximately~~net ~~$0.3 million;~~revenues ~~(4) interest~~as ~~income~~a result of ~~approximately~~the ~~$1.0 million;~~cost increase for fuel used in our transportation and route (operations and an increase of 0.5)% as a percent of net revenues in our delivery and ~~gains~~distribution ~~realized~~costs onprimarily ~~asset~~as ~~sales~~a result of $0higher vehicle insurance costs.~~2 million.~~

~~Second quarter year~~Year-to-date ~~reorganization~~we ~~charges~~experienced ~~for~~a ~~fiscal~~decrease ~~2007~~in ~~were~~selling, ~~approximately~~delivery ~~$16.7 million~~ and ~~included~~administrative ~~(1) professional~~expense ~~fees~~as a percent of ~~approximately~~net ~~$18~~revenues of 1.~~4 million;~~0%. ~~(2) employee~~Contributing ~~retention~~to this improvement, we had a actuarial gain associated with the ABA Plan which resulted in a credit to benefit plan expense in the second quarter of fiscal 2009 of ~~approximately~~0.9% $as a percent of net revenues. We also experienced a decrease in our labor and fringe and corporate costs of 0.~~7 million;~~9% (and 0.3~~) lease~~%, ~~rejection~~respectively, ~~charges~~as a percent of ~~approximately~~net $0revenues.~~1 million;~~ ~~(4)~~The reduction in ~~interest~~labor ~~income~~and fringe costs year-to-date as compared to the same period in the prior year reflected our exit from bread operations in Southern California and our route reduction efforts, while the reduction in our corporate costs relates to, among other things, the elimination of ~~approximately~~the ~~$1.7 million;~~incentive bonus accrual, a reduction in certain professional fees and ~~(5) gains~~a ~~realized~~decrease onin ~~asset~~corporate ~~sales~~staff. These cost savings were partially offset by an increase in energy costs of $0.8% as a percent of net ~~million~~revenues as a result of the cost increase for fuel used in our transportation and route operations and an increase of 0.3% as a percent of net revenues in our delivery and distribution costs primarily as a result of higher vehicle insurance costs.

38Restructuring Charges (Credits)

~~Interest~~During ~~Expense~~the second quarter of fiscal 2009, we recorded a net restructuring credit of approximately $1.8 million. We realized net gains of approximately $2.2 million resulting from the sale of assets that were held for sale as part of the Southern California restructuring plan, offset by approximately $0.4 million in other exit costs related to taxes, security, utilities and cleanup for other Southern California assets that continue to be held for sale.

~~Net~~During ~~interest expense for~~ the second quarter ~~was~~of ~~approximately~~fiscal 2008, we incurred net restructuring charges of approximately $117.39 million ~~representing~~related aprincipally ~~decrease~~to the Southern California and sales restructuring plans initiated in fiscal 2008. This included severance costs and related benefits of approximately $07.16 million and ~~when~~additional ~~compared~~exit costs related to ~~approximately~~relocation, ~~$11.4 million~~taxes, insecurity, ~~the~~utilities ~~second~~and ~~quarter~~cleanup of assets ~~fiscal~~held ~~2007~~for sale of approximately $0.7 million ~~This~~offset ~~decrease~~by ~~results~~gains ~~from~~on asale ~~slight~~of ~~decrease~~real inestate ~~interest~~of ~~rates~~approximately $0.4 million.

Year- to- date ~~interest~~for ~~expense~~fiscal ~~was~~2009, ~~approximately~~we ~~$22.3 million~~recorded ~~representing~~ a ~~decrease~~net restructuring credit of approximately $16.92 million. We ~~when~~realized ~~compared~~net togains of approximately $247.20 million ~~for~~resulting from the ~~same~~sale ~~period~~ of ~~fiscal~~ ~~2007.~~assets ~~This~~that ~~decrease~~were held ~~results~~for ~~from~~sale aas ~~reduction~~part of ~~funded~~the ~~debt~~Southern ~~totaling~~California ~~approximately~~restructuring ~~$45~~plan, offset by approximately $0.8 million ~~with~~in ~~slightly~~other ~~lower~~exit ~~interest~~costs ~~rates~~related to taxes, security, utilities and acleanup ~~decrease~~for inother Southern ~~collateral~~California ~~review~~assets ~~fees~~that continue to be held for sale.

~~Provision~~Year-to-date ~~for~~fiscal ~~Income~~2008 ~~Taxes~~restructuring charges reasonably approximated the second quarter charges.

~~The effective income tax benefit rates were 5.4% and 3.1% for year-to-date fiscal 2008 and fiscal~~33 2007, respectively. Our effective income tax rate for fiscal 2008 was negatively impacted by the adoption of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48), on June 3, 2007. Additionally, our effective income tax rates for year-to-date fiscal 2008 and 2007 were negatively impacted by valuation allowances recorded because we do not believe that it is more likely than not that our net operating losses and certain other deferred tax assets will be able to be utilized in future years. We provide a valuation allowance against deferred tax assets if, based on management’s assessment of operating results and other available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

CASHTable RESOURCESof AND LIQUIDITY Contents

~~CASH~~Property ~~FLOWS~~and Equipment Impairment

~~During~~We ~~the~~had ~~twenty-four~~no ~~weeks~~property ~~ended~~and ~~November 17,~~equipment ~~2007,~~impairment ~~the Company used $8.8 million of cash, which was the net impact of $5.6 million in cash generated from operating~~ activities, ~~$10.7 million~~during ~~in cash~~fiscal ~~used in investing activities, and $3~~2009.~~7 million in cash used for financing activities.~~

~~Cash~~On ~~From~~August 28, ~~(Used~~2007, ~~In)~~we ~~Operating~~announced ~~Activities~~our intention to exit the bread market in Southern California. This action entailed the closure of four bakeries and the consolidation of related routes and distribution centers. Based upon our intention to pursue this plan of action and in anticipation of the disposal of certain related assets, we recorded a net impairment loss to the carrying value of these assets of approximately $9.8 million in fiscal 2008.

~~Cash~~Operating ~~from~~Profit operating activities for fiscal 2008 was $5.6 million, which represents an increase of $35.2 million from cash used in the same period in fiscal 2007 of $29.6 million. While we posted a net loss of $55.2 million during the twenty-four week period, some items contributing to the loss were non-cash items, including $30.9 million related to depreciation and amortization and $9.6 million in losses on sale, write-down or abandonment of assets. Changes in working capital components generated $14.3 million in cash during the twenty-four week fiscal period primarily due to (1Loss) ~~a decrease in accounts receivable of $17.3 million; (2) a reduction in inventories of $11.9~~ million; offset by (3) an decrease in accounts payable and accrued expense of $14.4 million; and (4) other items totaling $0.5 million. The decrease in accounts receivable and inventory were largely driven by closures in Southern California. The working capital impact was $14.2 million and $3.2 million, respectively. For fiscal 2007, changes in working capital components used cash of $8.1 million.

~~Cash From~~ (~~Used~~dollars ~~In)~~in ~~Investing Activities~~thousands)

Cash used in investing activities to date during fiscal 2008 was $10.7 million, a $89.6 million reduction in the cash generated during fiscal 2007 of $78.9 million. This significant decrease is primarily attributable to the release, pursuant to the eighth amendment to the DIP Facility, of restricted cash previously held as collateral and unavailable to the Company in the amount of $89.2 million (excluding interest earned) at August 25, 2006, the effective date of the eighth amendment to the DIP Facility. During the twenty-four week period of fiscal 2008, we received $3.8 million in asset sale proceeds and made deposits to the restricted cash account in accordance with the DIP Facility in the amount of $3.9 million to date (excluding interest earned). We used $10.6 million to acquire property, equipment and software assets. During the same period in fiscal 2007, we received asset sale proceeds in the amount of $13.2 million and made deposits to the restricted cash account in accordance with the DIP Facility in the amount of $11.4 million. During the same period in fiscal 2007, purchases of property, equipment and software assets totaled $12.4 million.


	Twelve Weeks Ended												Twenty-four Weeks Ended
	November 15,						November 17,						November 15,						November 17,
	2008			%			2007			%			2008			%			2007			%
Segment Profit (Loss)

Route profit (loss)	$	13,038			338.1	%	$	6,401			(38.2	)%	$	5,039			(36.0	)%	$	29,658			(174.4	)%
Outlet profit (loss)		5,431			140.9			5,232			(31.2	)		11,048			(78.9	)		12,440			(73.1	)
Direct profit (loss)		2,678			69.4			2,275			(13.6	)		3,470			(24.7	)		3,748			(22.0	)


Total segment profit (loss)		21,147			548.4			13,908			(83.0	)		19,557			(139.6	)		45,846			(269.5	)
Corporate		(17,291	)		(448.4	)		(30,654	)		183.0			(33,562	)		239.6			(62,856	)		369.5


Total operating profit (loss)	$	3,856			100.0	%	$	(16,746	)		100.0	%	$	(14,005	)		100.0	%	$	(17,010	)		100.0	%

39Consolidated Operating Profit (Loss)

~~Cash~~Based ~~From~~upon ~~(Used~~the ~~In)~~above ~~Financing~~factors, ~~Activities~~the operating profit for the second quarter of fiscal 2009 was approximately $3.9 million, an increase in operating profit of approximately $20.6 million compared to the prior year’s operating loss of approximately $16.7 million. Our operating profit for the second quarter of fiscal 2009 included a net restructuring credit of approximately $1.8 million and the ABA Plan actuarial gain of approximately $11.2 million while the operating loss for the second quarter of fiscal 2008 included a net restructuring charge of approximately $7.9 million.

~~Cash~~The ~~used~~operating inloss ~~financing~~for ~~activities~~ year-to -date in fiscal ~~2008~~2009 was approximately $314.70 million, ~~$42.1 million~~a ~~less~~decrease ~~than the~~in ~~cash used during~~ the operating ~~same~~loss ~~period in fiscal 2007~~ of approximately $453.80 million. ~~This~~from ~~cash~~the ~~used~~prior ~~during~~year’s ~~2007~~loss ~~is primarily due to a payment~~ of ~~our~~approximately ~~pre-petition secured debt of~~ $4517.4 0 million. ~~The~~Our ~~previously discussed eighth amendment~~ year-to-date ~~the~~operating ~~DIP~~loss ~~Facility~~for ~~released~~fiscal ~~restricted~~2009 ~~cash~~included ~~plus~~a ~~accumulated~~net ~~interest in~~restructuring ~~the~~credit ~~amount~~ of approximately $906.72 million ~~effective~~and ~~August 25,~~the ~~2006~~ABA ~~and~~Plan ~~required~~actuarial ~~that~~gain of approximately $4511.42 million ofwhile ~~that~~the ~~amount~~operating beloss ~~used~~for year-to ~~reduce the outstanding balance of the pre~~-~~petition~~date ~~senior~~fiscal ~~secured~~2008 ~~debt.~~included ~~This compares~~a tonet ~~cash~~loss ~~used~~on inrestructuring ~~financing activities in fiscal 2008~~ of approximately $3.7.9 million ~~due~~and ~~primarily~~equipment toimpairment ~~$5.6 million~~charges ~~in debt fees offset by an increase in our pre-petition senior secured revolving credit facility due to letter~~ of ~~credit~~approximately ~~draws~~$9.8 million.

~~SOURCES~~Route OFoperating ~~LIQUIDITY~~profit ~~AND~~(loss). ~~CAPITAL~~Route operations for the second quarter of fiscal 2009 experienced an operating profit of approximately $13.0 million, representing an increase of approximately $6.6 million from route operating profit of approximately $6.4 million in the second quarter of fiscal 2008. The second quarter increase in route operating profit was attributable to a decrease in route operating costs of approximately $9.7 million, which was partially offset by a decrease in route net revenues of approximately $3.1 million when compared to the same period in the previous year. On a year-to-date basis, our route operating profit for fiscal 2009 was approximately $5.0 million, representing a decrease of approximately $24.6 million from operating income of approximately $29.6 million for the same period of the prior year. The year-to-date second quarter decrease in route operating profit was attributable to a decrease in route net revenues of approximately $32.4 million which was partially offset by a decrease in route operating costs of approximately $7.8 million when compared to the same period in the previous year. The significant increases in our costs of ingredients and fuel were primary factors in the continued rise of our operating costs, offset by the ABA Plan actuarial gain.

~~We have historically maintained two primary sources for debt capital: (1) bank lines of credit; and~~34 (2) capital and operating lease financing to support the acquisition and lease of our bakery outlets, depots, route trucks, tractors, trailers and computer equipment. In addition, on August 12, 2004, we issued in a private placement $100.0 million aggregate principal amount of our 6.0% senior subordinated convertible notes due August 15, 2014. Purchasers had an option to purchase in the aggregate up to $20.0 million in additional notes for a period of 60 days following the closing, which purchase option was not exercised. Under certain circumstances, the notes are convertible at the option of the holder into shares of our common stock at an initial conversion rate of 98.9854 shares per $1,000 principal amount of notes (an initial conversion price of $10.1025 per share), subject to adjustment. Failure to maintain adequate sources of debt capital would have a material adverse impact on our operations.

AtTable November 17, 2007, under our Senior Secured Credit Facility, we owed $374.2 million in term loans and $76.0 million in a revolver loan. In addition, at November 17, 2007, we had issued $89.4 million in letters of credit under our revolver loan. Contents

~~The~~Outlet ~~foregoing~~operating ~~commitments~~profit ~~regarding~~(loss). ~~our~~Outlet ~~senior~~operating ~~secured~~profit ~~term~~for ~~and~~the ~~revolving~~second ~~credit~~quarter ~~facilities~~of ~~and~~fiscal ~~our~~2009 was 6%approximately ~~senior~~$5.4 million, ~~subordinated~~representing ~~convertible~~an ~~notes~~increase ~~due~~of ~~August~~approximately $0.2 ~~15,~~million ~~2014~~from ~~include~~outlet operating ~~significant~~profit ~~obligations~~of ~~that~~approximately $5.2 million in the second quarter of fiscal 2008. The second ~~occurred~~quarter ~~prior~~increase in outlet operating profit was attributable to ~~our~~an ~~bankruptcy~~increase ~~filing~~of ~~(see~~approximately $1.0 million ~~Voluntary~~in ~~Chapter~~net outlet revenues partially offset by an increase in operating costs of approximately $0.8 million when compared to the same period in the previous year. On a year-to-date basis, our outlet operating profit for fiscal 2009 was approximately $11.0 million, representing ~~Bankruptcy~~a ~~Filing~~decrease ~~below)~~of approximately $1.4 million ~~Under~~from operating income of approximately $12.4 million for the ~~Bankruptcy~~same ~~Code,~~period ~~actions~~of tothe ~~collect~~prior ~~pre~~year. The year-~~petition~~to-date ~~indebtedness~~fiscal ~~are~~2009 ~~stayed~~decrease ~~and~~in ~~our~~route operating ~~other~~profit was attributable to a decrease of approximately $0.8 million in net outlet ~~contractual~~revenues ~~obligations~~coupled ~~may~~with ~~not~~an beincrease ~~enforced~~in ~~against~~outlet usoperating costs of approximately $0.6 million ~~Therefore,~~when compared to the ~~commitments~~same ~~shown~~period ~~above~~in ~~may~~the previous year. As with our route operations, increased ~~not~~ingredient ~~reflect~~costs ~~actual~~of ~~cash~~our ~~outlays~~bakery goods was a significant negative factor in ~~future~~our ~~periods~~cost structure for outlet operations.

~~Voluntary~~Direct ~~Chapter~~operating profit (loss). Direct operating profit for the second quarter of fiscal 2009 was approximately $2.7 11million, ~~Bankruptcy~~representing ~~Filing~~an increase of approximately $0.4 million from operating profit of approximately $2.3 million in the second quarter of fiscal 2008. The increase in direct operating profit for the second quarter of fiscal 2009 was attributable to an increase in direct net revenues of approximately $0.9 million partially offset by an increase in direct operating costs of approximately $0.5 million when compared to the same period in the previous year. On a year-to-date basis, our direct operating profit for fiscal 2009 was approximately $3.5 million, representing a decrease of approximately $0.3 million from operating income of approximately $3.8 million for the same period of the prior year. The year-to-date fiscal 2009 decrease in direct operating profit was attributable to an increase in direct net revenues of approximately $0.9 million that was more than offset by an increase in direct operating costs of approximately $1.2 million when compared to the same period in the previous year.

OnReorganization ~~September 22, 2004 (the Petition Date), due to significantly limited liquidity, we and each of~~Charges our wholly-owned subsidiaries filed voluntary petitions for reorganization relief under Chapter 11 of the Bankruptcy Code. On January 14, 2006, a subsidiary of which we are an eighty percent owner, Mrs. Cubbison’s Foods, Inc., also filed a voluntary petition for reorganization relief under Chapter 11 of the Bankruptcy Code. These filings were made in order to facilitate the restructuring of our business operations, trade liabilities, debt, and other obligations. We are currently operating our business as a debtor-in-possession under the supervision of the Bankruptcy Court.

~~Subsequent~~For to the ~~Petition~~quarter ~~Date,~~ended ~~the Company and a syndicate of lenders~~November 15, ~~including JPMorgan Chase Bank~~2008, ~~entered~~reorganization ~~into~~charges athat ~~debtor-in-possession~~we ~~Revolving~~incurred ~~Credit~~under ~~Agreement~~our bankruptcy toproceedings ~~provide~~were upapproximately to $~~200~~34.0 1 million ~~in post-petition financing~~. The ~~Revolving~~net ~~Credit~~cost ~~Agreement~~of ~~has~~these ~~been~~activities ~~amended ten times,~~included: ~~including the most recent amendment dated October 1, 2007~~ (~~collectively, DIP Facility~~1). professional ~~The~~fees ~~DIP Facility~~and ~~expires~~similar ontypes ~~the~~of ~~occurrence~~expenses of anapproximately ~~event~~$14.3 million ~~that~~related ~~constitutes a termination date as defined in the DIP Facility agreement or, if no such event has occurred, pursuant~~ to ~~an extension, on February 9, 2008. All outstanding borrowings under~~ the ~~DIP Facility, if any, are due and payable on the~~ ~~termination~~Chapter 11 ~~date.~~proceedings; ~~The obligations under the DIP Facility are secured by~~ (2) a ~~superpriority~~credit ~~lien against our assets in favor of the DIP lenders. The DIP Facility may be utilized~~ for ~~the~~lease ~~issuance of~~rejection ~~letters~~adjustments of ~~credit~~approximately ~~up to an aggregate amount equal to~~ $~~150.~~0.2 million~~, which amount was increased~~; ~~from~~(3) interest ~~the~~income ~~original limitation~~ of approximately $~~75.~~0.1 million asand; (4) a ~~result~~charge offor ~~prior~~claim ~~amendments.~~settlements ~~In connection with~~related ~~entering into the DIP Facility, we also make periodic adequate protection payments~~ to ~~our pre-petition secured lenders in~~ the ~~form~~ABA Plan of ~~interest,~~approximately ~~fees and expenses based on amounts owed under the pre-petition Senior Secured Credit Facility~~$20.1 million.

40For the quarter ended November 17, 2007, reorganization charges were approximately $11.7 million. The cost of these activities included: (1) professional fees and similar types of charges related to the Chapter 11 proceedings of approximately $12.4 million; (2) lease rejection charges of approximately $0.1 million; (3) interest income of approximately $0.6 million; and (4) credits of approximately $0.2 million resulting from gains realized on asset sales.

~~The~~Second ~~DIP~~quarter ~~Facility~~year-to-date ~~subjects~~reorganization uscharges tofor ~~certain~~fiscal ~~obligations,~~2009 ~~including,~~were ~~but~~approximately ~~not~~$40.1 million. ~~limited~~The ~~to,~~net ~~the~~cost ~~delivery~~ of ~~financial~~ ~~statements~~these ~~and~~activities ~~certifications,~~included: ~~cash~~(1) professional ~~flow~~fees ~~forecasts,~~ and ~~operating~~similar ~~budgets~~types ~~at specified~~of ~~intervals~~expenses ~~and~~of ~~cumulative~~approximately ~~minimum EBITDA requirements~~$20.7 million ~~Furthermore,~~related weto ~~are~~the ~~subject~~Chapter 11 toproceedings; ~~certain~~(2) lease rejection ~~limitations~~credits onof ~~the~~approximately ~~payment~~$0.2 million; (3) interest income of ~~indebtedness,~~approximately ~~entering~~$0.1; ~~into~~(4) net ~~investments,~~credits resulting from the ~~payment~~adjustment of ~~capital expenditures,~~accruals ~~the~~for ~~incurrence~~employee retention of ~~cash~~approximately ~~restructuring~~$0.2 million; ~~charges~~(4) credits ~~and~~of ~~the~~approximately ~~payment~~$ ~~of dividends~~0.2 million ~~Failure~~resulting ~~to comply~~from ~~with~~gains ~~these~~realized ~~obligations~~on ~~could~~asset ~~lead~~sales toand; an(5) a charge ~~event~~for ofclaim ~~default~~settlements ~~under~~related to the ~~DIP~~ABA ~~Facility~~Plan ~~and acceleration~~ of ~~payments~~approximately ~~hereunder~~$20.1 million.

InSecond ~~addition,~~quarter ~~payment~~year-to-date ~~under~~reorganization ~~the~~charges ~~DIP~~for ~~Facility~~fiscal ~~may~~2008 bewere ~~accelerated~~approximately ~~following~~$18.9 million. ~~certain~~The ~~events~~cost of ~~default including,~~these ~~but~~activities ~~not~~included ~~limited to,~~ (1) ~~the~~professional ~~conversion~~fees ofand ~~any~~similar types of ~~the bankruptcy cases to a case under~~expenses ~~Chapter 7~~ of ~~the~~approximately ~~Bankruptcy~~$20.0 million ~~Code~~related orto the ~~appointment of a trustee pursuant to~~ Chapter 11 ~~of the Bankruptcy Code~~proceedings; (2) ~~our~~lease ~~making~~rejection ~~certain payments~~ charges of ~~principal~~approximately ~~or interest on account of pre-petition indebtedness or payables~~$0.3 million; (3) ainterest ~~change~~income of ~~control~~approximately ~~(as defined in the DIP Facility)~~$1.0; (4) annet ~~order~~credits ofresulting from the ~~Bankruptcy~~adjustment ~~Court permitting holders~~ of ~~security~~accruals ~~interests~~for toemployee ~~foreclose~~retention ~~on debt secured by any~~ of ~~our~~approximately ~~assets which have an aggregate value in excess of~~ $1.0 ~~million; (5) the entry of any judgment in excess of $1~~.02 million ~~against us, the enforcement of which remains unstayed~~and; ~~(6) certain~~ ~~Termination Events~~ (~~as defined in the DIP Facility~~4) ~~related to ERISA plans; and (7)~~ ~~failure~~credits ~~to make payments required by Section 302(f)(1)~~ of ~~ERISA~~approximately ~~where the amount determined under Section 302(f)(3) of ERISA is equal to or greater than~~ $1. 0.2 million, ~~subject~~resulting tofrom ~~certain~~gains ~~exceptions. Notwithstanding~~realized ~~acceleration~~on ~~pursuant~~asset ~~to an event of default, the maturity date of the DIP Facility is February 9, 2008~~sales.

AtInterest ~~November 17, 2007, we were in compliance with all financial covenants, terms and conditions of~~Expense ~~the DIP Facility.~~

AsInterest ofexpense ~~November 17,~~for ~~2007,~~the wesecond ~~had~~quarter ~~not~~was ~~borrowed~~approximately ~~under the DIP Facility~~$14.4 million ~~However,~~representing ~~the~~a ~~DIP~~net ~~Facility was~~increase ~~utilized to support the issuance~~ of ~~letters~~approximately ~~of credit in the amount of~~ $~~122~~3.1 million ~~primarily~~when compared to ~~support~~ ~~our workers’ compensation and auto liability insurance programs. These letters of credit were partially collateralized by~~ approximately $1911.23 million ofin ~~restricted~~the ~~cash~~second asquarter ~~required by the~~of ~~DIP~~fiscal ~~Facility~~2008.

~~As a result of the Chapter 11 filing, our principal sources of liquidity used in funding short-term~~35 operating expenses, supplies and employee obligations include cash balances, operating and investing cash flows and the $200.0 million DIP Facility. As of November 17, 2007, we had approximately $58.4 million in available cash and $51.8 million available for borrowing under the DIP Facility. This compares to the $67.2 million in available cash and $90.3 million available for borrowing under the DIP Facility as of June 2, 2007. These amounts of available cash exclude $27.3 million and $32.9 million at November 17, 2007 and June 2, 2007, respectively, related to checks written in excess of recorded balances included in accounts payable on our consolidated balance sheets. We cannot assure you that the amount of cash from operations and from our DIP Facility will be sufficient to fund operations until such time as we are able to propose a plan of reorganization that will receive the requisite acceptance by creditors, equity holders and parties in interest and be confirmed by the Bankruptcy Court. In the event that cash flows and available borrowings under the DIP Facility are not sufficient to meet our liquidity requirements, we may be required to seek additional financing.

SinceTable the Petition Date, we have been actively engaged in restructuring our operations and selling assets no longer necessary to our operations. We continue to analyze our business based on a number of factors including, but not limited to, historical sales results, expected future sales results, cash availability, production costs, utilization of resources, and manufacturing and distribution efficiencies. As part of our restructuring efforts we are evaluating various alternatives including, but not limited to, the sale of some or all of our assets, infusion of capital, debt restructuring and the filing of a plan of reorganization with the Bankruptcy Court, or any combination of these options. Contents

~~The~~This ~~maturity~~net ~~date~~increase ofin ~~the~~interest ~~DIP~~expense ~~Facility~~was ~~has~~primarily ~~been~~attributable ~~extended~~ to ~~June 2,~~an ~~2008.~~increase Weof ~~may need to negotiate~~approximately an$4.0 million ~~additional~~in ~~extension~~amortized ofdebt ~~the~~fees ~~maturity~~associated ~~date~~with ~~or refinance~~ the ~~DIP~~post-petition ~~Facility~~debt tofacilities ~~provide~~and ~~adequate time~~an toincrease ~~complete a plan~~ of ~~reorganization~~approximately $1.7 million ~~There~~in ~~can~~interest becost noassociated ~~assurance~~with ~~that~~an weincrease ~~will be successful~~ in ~~extending~~ ~~or refinancing the~~ DIP Facility ~~or that we can extend or refinance the DIP Facility on~~ ~~terms~~borrowings, ~~favorable~~offset toby ~~us. Failure to obtain such extension or additional or replacement financing would have~~ a ~~material~~decrease ~~adverse~~of ~~impact~~approximately on$2.6 ~~our~~attributable ~~ability~~ to ~~operate as~~ a ~~going~~reduction ~~concern~~in interest rates.

41Year-to-date interest expense was approximately $27.9 million representing an increase of approximately $5.6 when compared to approximately $22.3 million for the same period of fiscal 2008. This net increase in interest expense was primarily attributable to an increase of approximately $8.3 million in amortized debt fees associated with the post-petition debt facilities and an increase of approximately $3.0 million in interest cost associated with an increase in DIP Facility borrowings, offset by a decrease of approximately $5.7 attributable to a reduction in interest rates.

OnProvision ~~October 1, 2007, we entered into the first amendment to the Amended and Restated Revolving Credit Agreement which~~ (1Benefit) ~~amended~~ ~~the definition of the Borrowing Base to include an additional reserve of $10.0 million until such time as the Bankruptcy Court enters a final order approving (a) a disclosure statement that provides~~ for ~~payment~~Income ~~in full of the DIP Facility obligations, and (b)~~Taxes evidence of a commitment for exit financing associated with a plan of reorganization; (2) increased the maximum allowable cash restructuring charges incurred since December 17, 2006 from $10.0 million to $23.0 million; and (3)established a requirement that, in the event we do not publicly announce that we have reached an agreement in principal with our two largest union groups regarding certain concessions and alignment with our business plan, we submit a plan to the lenders on or before December 1, 2007 that describes our strategy for maximizing the value of the bankruptcy estates through a sale of the Company or its assets, all as described in the amendment.

OnThe ~~November 29,~~effective ~~2007,~~income wetax ~~entered~~benefit ~~into~~rates ~~the~~were ~~second~~4.6% ~~amendment~~and 5.4% for year-to-date ~~the~~fiscal ~~Amended~~2009 and ~~Restated Revolving~~fiscal ~~Credit~~2008, ~~Agreement~~respectively. ~~which~~The ~~changes~~lower ~~the~~effective ~~date~~income tax benefit rate for ~~delivery~~year-to-date offiscal a2009 ~~revised~~is due ~~plan~~to ~~detailing~~an ~~the~~increase ~~Borrower’s proposed~~in ~~strategy~~state ~~for~~income ~~maximizing~~tax ~~the~~expense ~~value~~recognized ofas ~~the~~compared ~~bankruptcy~~to ~~estates~~fiscal 2008. IfOur oneffective income ortax ~~before~~rates ~~January 29,~~ for year-to-date fiscal 2009 and 2008, ~~IBC~~were ~~has~~negatively impacted by valuation allowances recorded because we do not ~~reached~~believe anthat ~~agreement~~it inis ~~principle~~more ~~with~~likely ~~our~~than ~~two~~not ~~largest~~that ~~union~~our ~~groups~~net operating losses and ~~Silver Point~~certain ~~Finance~~other Ldeferred tax assets will be able to be utilized in future years.~~L.C.~~ We ~~(or~~provide ana ~~approved~~valuation ~~provider~~allowance ofagainst ~~alternate~~deferred ~~exit~~tax ~~financing,~~assets if, ~~applicable)~~based ~~has~~on ~~not~~management’s assessment ~~announced~~of ~~its~~operating ~~support~~results ofand ~~the~~other ~~labor~~available ~~agreements~~evidence, ~~then,~~it ~~the~~is ~~lender~~more ~~may~~likely ~~request~~than innot ~~writing~~that asome ~~plan~~or toall beof ~~delivered~~the ~~within~~deferred ~~twenty-one~~tax ~~days~~assets ofwill ~~receipt~~not ofbe ~~the written request~~realized.

OnCASH ~~December 19,~~RESOURCES ~~2007,~~AND ~~we entered into the third amendment to the Amended and Restated Revolving~~LIQUIDITY Credit Agreement which (1) extends the maturity date from February 9, 2008 to June 2, 2008; (2) redefines the real property component of the borrowing base to the lesser of (a) $80.0 million or (b) 40% of the borrowing base inclusive of the real property component but excluding the plan reserve; (3) amends the permitted capital expenditures by fiscal quarter through the quarter ending May 31, 2008; (4) amends the minimum cumulative consolidated EBITDA by fiscal quarter through the quarter ending May 31, 2008; and (5) limits cash restructuring charges for the fiscal period beginning December 17, 2006 and ending May 31, 2008 to $23.0 million.

~~Our~~CASH ~~future capital requirements will depend on many factors, including our evaluation of various~~FLOWS ~~alternatives in connection with our restructuring, the form of our plan of reorganization, the~~ aggregate amount to be distributed to creditors to satisfy claims, the amount of any unknown claims or contingent claims from creditors or equity holders, the outcome of litigation and the costs of administering the Chapter 11 process, including legal and other fees. At this time it is not possible to predict the exact amount or nature of such future capital requirements. In addition, there can be no guarantee that additional capital will be available to us, or that such capital will be available on favorable terms. Raising additional capital could result in the significant dilution or cancellation of current equity interests, but it is not possible to predict the extent of such potential dilution or whether existing equity will be cancelled at this time.

~~Our~~During ~~financial~~the ~~statements are prepared on a going~~twenty-~~concern~~four ~~basis,~~weeks ~~which~~ended ~~contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, because of the Chapter~~November ~~11 filing process and our recurring losses from operations~~15, ~~negative working capital~~2008, ~~downward~~ ~~sales trends, and~~ the ~~potential~~Company ~~lack~~used ~~of liquidity should we be unable to successfully reorganize under Chapter~~$0.4 ~~11,~~million there is substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent upon, among other things, our ability to evaluate and execute various alternatives including the sale of ~~some or all of our assets~~cash, ~~infusion~~which ofwas ~~capital, debt restructuring and~~ the ~~development,~~net ~~confirmation~~impact ~~and implementation~~ of a$45.6 million ~~plan~~in ~~of reorganization,~~cash ~~our~~used ~~ability~~in tooperating ~~comply with the terms of the DIP Facility, our ability to negotiate an extension of or refinance our DIP Facility at its maturity, our ability to implement our restructuring~~ activities, our ability to obtain concessions from our labor unions, our ability to obtain financing upon exit from bankruptcy and our ability to generate sufficient cash from operations to meet our obligations and any combination of these factors$4.9 million Inprovided ~~the event our~~by ~~restructuring~~investing activities ~~are not successful and we are required to liquidate~~, ~~additional significant adjustments would be necessary in the carrying value of assets~~ and ~~liabilities, the revenues and expenses reported and the balance sheet classifications used~~$40.3 million ~~Further,~~provided ~~the~~by ~~value~~financing ~~of debt and equity interests may be significantly or completely impaired in the event of a liquidation or conversion to a Chapter 7 proceeding~~activities.

~~OFF-BALANCE~~Cash ~~SHEET~~Provided ~~FINANCING~~By (Used In) Operating Activities

WeCash doused ~~not~~in ~~participate~~operating activities for fiscal 2009 was $45.6 million as compared to cash provided by operating activities of $5.6 million in the same period in fiscal 2008, ~~nor~~which ~~secure~~was ~~financings~~an ~~for~~increase in the use of cash of $51.2 million. Some items contributing to the net loss of $78.3 million during the twenty-four week fiscal period were non-cash items, ~~any~~including ~~unconsolidated~~$27.3 million related to depreciation and amortization and $9.2 million write-off of deferred debt fees offset by net gains on the sale, ~~special~~write-down ~~purpose~~or ~~entities~~abandonment of assets of $6.0 million. Changes in working capital components used $21.3 million in cash during the twenty-four week fiscal period primarily due to; (1) a decrease in accounts payable and accrued expenses of $7.6 million; (2) an increase in other current assets of $5.5 million due to prepaid insurance and margin deposits; and (3) a decrease in other liabilities of $13.1 million due principally to the $11.2 million actuarial gain associated with the ABA Plan partially offset by (4) a decrease in accounts receivable of $2.0 million and (5) other items totaling $2.9 million. For fiscal 2008, changes in working capital components generated cash of $5.6 million.

42Cash Provided By (Used In) Investing Activities

~~FINANCIAL~~Cash ~~INFORMATION~~provided ~~ABOUT~~by ~~INDUSTRY~~investing ~~SEGMENTS~~activities for fiscal 2009 was $4.9 million as compared to cash used in investing activities of $10.7 million in fiscal 2008, which was a $15.6 million increase in cash provided from investing activities. During the twenty-four week period of fiscal 2009, we received $11.6 million in asset sale proceeds and used $6.7 million to acquire property and equipment. During the same period in fiscal 2008, we received asset sale proceeds in the amount of $3.8 million, used $10.6 million to acquire property, equipment and software assets and made deposits to the restricted cash account in accordance with the DIP Facility in the amount of $3.9 million.

WeCash ~~initiated~~Provided ~~changes~~By in(Used ~~our~~In) ~~reporting~~Financing ~~system effective for the beginning of fiscal 2008, which~~Activities resulted in the identification of three distinct reportable segments. The three reportable segments were determined by type of customer and distribution method. Management continues to maintain the wholesale operations and retail operations as reporting segments, but renamed them as route sales and outlet sales, respectively. The third reporting segment, direct sales, was established by segregating certain operations previously within wholesale operations that deliver products exclusively through warehouse channels. Our reportable segments are strategic business units that are managed separately using different distribution and marketing strategies.

~~Our~~Cash ~~route~~from ~~sales,~~financing ~~formerly~~activities ~~wholesale~~for ~~operations,~~fiscal ~~consist~~2009 ofwas an$40.3 million ~~aggregation~~compared ofto ~~our~~cash ~~eight~~used ~~business~~by financing ~~units~~activities ~~that manufacture, distribute, and sell fresh baked goods utilizing our direct store delivery~~of ~~system.~~

~~Our outlet sales, formerly retail operations, consist of five regions that sell our baked goods and~~36 ~~other food items directly to consumers through company-operated outlet locations.~~

OurTable direct sales consist of our direct warehouse shipment program, which ships bulk packaged sweet goods and dry products, such as croutons and stuffing mix, directly to customer-owned distribution centers and public warehouses for distribution. Contents

~~See~~$3.7 million ~~Note~~during 19the same period in fiscal 2008, which was a $44.0 million ~~Segment~~increase ~~Information~~in cash provided from financing activities. The cash provided during the twenty-four weeks ended November 15, 2008 was primarily due to ~~these~~a ~~condensed~~net ~~consolidated~~increase ~~financial~~in ~~statements~~our post-petition debt of $49.8 million and an increase in our pre-petition senior secured revolving credit facility of $1.2 million resulting from letter of credit draws. These amounts were offset by a reduction of $0.3 million in long-term debt and the payment of debt and other commitment fees of $10.4 million. This compares to cash used from financing activities for ~~further~~the same period in fiscal 2008 of $3.7 million which resulted from ~~information~~the payment of debt fees of $5.6 million and the reduction of $0.5 million of long-term debt that was partially offset by an increase in our pre-petition senior secured revolving credit facility of $2.4 million due to letter of credit draws.

~~RECENT~~SOURCES ~~ACCOUNTING~~OF ~~PRONOUNCEMENTS~~LIQUIDITY AND CAPITAL

~~See~~We ~~Note~~have 2.historically ~~Description~~maintained two primary sources for debt capital: (1) bank lines of ~~Business~~credit and (2) capital ~~Significant~~and ~~Accounting~~operating ~~Policies~~lease financing to ~~these~~support ~~condensed~~the acquisition and lease of our bakery ~~consolidated~~outlets, ~~financial~~depots, ~~statements~~route ~~for~~trucks, ~~further~~tractors, ~~information~~trailers ~~regarding~~and ~~recently~~computer equipment. In addition, on August 12, 2004, we issued ~~accounting~~$100.0 million aggregate principal amount of our 6.0% senior subordinated ~~standards~~convertible notes due August 15, 2014 in a private placement.

~~FORWARD~~At November 15, 2008, under our pre-~~LOOKING~~petition ~~STATEMENTS~~Senior Secured Credit Facility, we owed $374.1 million in term loans and $77.3 million in a revolver loan. In addition, at November 15, 2008, we had issued $83.1 million in letters of credit under our revolver commitment.

~~Some~~On ~~information~~September 22, ~~contained~~2004 in(the orPetition ~~incorporated~~Date), bydue ~~reference~~to ~~herein~~significantly ~~may~~limited beliquidity, ~~forward-looking~~we ~~statements within~~and ~~the~~each ~~meaning~~ of our ~~the~~wholly-owned ~~federal~~subsidiaries ~~securities~~filed ~~laws.~~voluntary ~~These~~petitions ~~forward-looking~~for ~~statements~~reorganization ~~are~~relief ~~not~~under Chapter 11 ~~historical~~of inthe ~~nature~~Bankruptcy ~~and~~Code. ~~include~~On ~~statements~~January 14, ~~that reflect~~2006, ~~when~~a ~~made,~~subsidiary ~~our~~of ~~views~~which ~~with~~we ~~respect~~are ~~to current~~an ~~events~~eighty ~~and~~percent ~~financial~~owner, Mrs. Cubbison’s ~~performance~~Foods, Inc., ~~These~~also ~~forward-looking~~filed ~~statements~~a ~~can~~voluntary bepetition ~~identified~~for ~~by forward-looking~~reorganization ~~words~~relief ~~such~~under Chapter 11 asof ~~“may,”~~the ~~“will,”~~Bankruptcy ~~“expect,”~~Code. ~~“intend,”~~These ~~“anticipate,”~~filings ~~“believe,” “estimate,”~~were ~~“plan,”~~made ~~“could,”~~in ~~“should”~~order ~~and~~to ~~“continue”~~facilitate orthe ~~similar~~restructuring of ~~words.~~our ~~These~~business ~~forward-looking statements~~operations, ~~may~~trade ~~also~~liabilities, ~~use~~debt, ~~different~~and ~~phrases~~other obligations. ~~These~~We ~~forward-looking~~are ~~statements~~currently operating ~~are~~our ~~not~~business ~~historical~~as a debtor-in ~~nature~~-possession ~~and~~under ~~include~~the ~~statements~~supervision ~~relating~~of ~~to,~~the ~~among~~Bankruptcy ~~other things:~~Court.

•The ~~our~~foregoing ~~ability~~commitments toregarding ~~continue as a going concern; •~~ our ~~ability~~pre-petition tosenior ~~obtain~~secured ~~court~~term ~~approval~~and ~~with~~revolving ~~respect~~credit facilities toand ~~motions filed by us from time to time in the Chapter 11 proceeding; •~~ our ~~ability~~6% tosenior ~~operate~~subordinated ~~pursuant~~convertible tonotes ~~the~~due ~~covenants~~August 15, ~~terms~~2014 ~~and~~include ~~certifications~~significant obligations ofthat ~~the~~occurred ~~DIP~~prior ~~Facility; • our ability~~ to ~~negotiate an extension (if necessary) or refinance~~ our ~~DIP~~bankruptcy ~~Facility,~~filing. ~~which,~~Under ~~pursuant~~the toBankruptcy ~~an extension~~Code, ~~expires~~actions ~~on June 2, 2008; • our ability~~ to collect ~~implement~~pre-petition ~~our~~indebtedness ~~business~~are ~~plan~~stayed ~~developed as a basis for our discussion regarding one or more plans of reorganization; • our ability to obtain concessions from our unionized workforce to reduce costs~~ and ~~allow for greater flexibility in the method and manner of distributing~~ our ~~products;~~other •contractual ~~our~~obligations ~~ability~~may tonot ~~confirm~~be enforced ~~and~~against ~~consummate a plan of reorganization with respect to the Chapter 11 proceeding;~~us.

43As a result of the Chapter 11 filing, our principal sources of liquidity used in funding short-term operating expenses, supplies and employee obligations include cash balances, operating and investing cash flows and the $309.0 million debtor-in-possession Revolving Credit Agreement (as amended, the DIP Facility) (as discussed below).

•DIP our ability to obtain the financing necessary to implement our business plan and emerge from Chapter 11; • risks associated with third parties seeking and obtaining court approval to terminate or shorten any such exclusivity period, for the appointment of a Chapter 11 trustee or to convert the Chapter 11 proceeding to a Chapter 7 proceeding; • risks associated with cost increases in materials, ingredients, energy, and employee wages and benefits; • risks associated with our restructuring activities, including the risks associated with achieving the desired savings in connection with our profit center restructuring and bakery and route consolidations and desired results of the initiatives currently being implemented; • our ability to obtain and maintain adequate terms with vendors and service providers; • the potential adverse impact of the Chapter 11 proceeding on our liquidity or results of operations; • risks associated with product price increases, including the risk that such actions will not effectively offset inflationary cost pressures and may adversely impact sales of our products; • the effectiveness of our efforts to hedge our exposure to price increases with respect to various ingredients and energy; • our ability to attract, motivate and/or retain key executives and employees; • changes in our relationship with employees and the unions that represent them; • successful implementation of information technology improvements; • increased costs and uncertainties with respect to the ABA Plan; • successful remediation of material weaknesses in our internal controls; • the continuing effects of changes in consumers’ eating habits; • the performance of our recent and planned new product introductions, including the success of such new products in achieving and retaining market share; and • the outcome of legal proceedings to which we are or may become a party.Facility

~~These~~Subsequent ~~forward-looking~~to ~~statements~~the ~~are~~Petition Date, the Company and ~~will~~a besyndicate ~~subject~~of lenders, including JPMorgan Chase Bank, entered into the DIP Facility to provide post-petition financing. The DIP Facility has been amended numerous ~~risks~~times, including most recently on September 12, 2008. Following the most recent amendment, the DIP Facility provides for borrowings of up to $309.0 million in the aggregate, the Commitment, and ~~uncertainties~~expires on the occurrence of an event that constitutes a termination date as defined in the DIP Facility or, ~~many~~if no such event has occurred on February 9, 2009. The Commitment provides for additional funding of ~~which~~$16.0 million ~~are~~on ~~beyond~~January 10, 2009, subject to (a) delivery of a statement certified by a financial officer of the Company and each of our ~~control~~subsidiaries that ~~could~~as ~~cause~~of January 10, ~~actual~~2009 ~~results~~certain conditions in the DIP Facility have been satisfied; (b) the Administrative Agent determining that the Company and our subsidiaries are diligently pursuing confirmation of the Plan; and (c) payment of a fee in the amount of $0.8 million to ~~differ~~the ~~materially~~Administrative ~~from~~Agent, ~~such~~for the ~~statements~~ratable benefit of the Tranche B lenders. ~~Factors~~Additionally, the Commitment is to be permanently reduced by an amount equal to the net proceeds from any asset sales, as defined under the DIP Facility, that ~~could~~are ~~cause~~required ~~actual~~to ~~results~~be remitted to ~~differ~~the ~~materially~~lenders ~~include~~for repayment of outstanding borrowings. All outstanding borrowings under the DIP Facility, ~~without~~if any, are due and payable on the termination date. The obligations under the DIP Facility are secured by a superpriority lien against our assets in favor of the DIP lenders. The DIP Facility may be utilized for the issuance of letters of credit up to an aggregate amount equal to $180.0 million, which amount was increased from the original limitation: of $75.0 million as a result of prior amendments. In connection with entering into the DIP Facility, we also make periodic adequate protection

~~Bankruptcy-Related Factors~~37

•Table the evaluation of various alternatives including, but not limited to, the sale of the Company or some or all of our assets, infusion of capital, debt restructuring and the filing and ultimate approval of a plan of reorganization with the Bankruptcy Court, or any combination of these options; • our ability to formulate a rational strategy for maximizing value of the bankruptcy estates, including a sale of the Company and/or its assets in its entirety or in a series of transactions; • the terms of any reorganization plan ultimately confirmed;Contents

44payments to our pre-petition senior secured lenders in the form of interest, fees and expenses based on amounts owed under the pre-petition Senior Secured Credit Facility.

•As ~~our~~of ~~ability~~November 15, to2008, ~~implement~~we ~~our~~had ~~business~~approximately ~~plan~~$24.7 million ~~developed~~in asavailable acash ~~basis~~and $54.8 million available for ~~our~~borrowing ~~discussion~~under ~~regarding~~the ~~one~~DIP orFacility. ~~more~~This ~~plans~~compares ~~of reorganization; • our ability~~ to ~~operate our business under~~ the ~~restrictions~~$25.1 million ~~imposed~~in byavailable cash ~~the Chapter 11 process~~ and in$53.0 million ~~compliance~~available ~~with~~for ~~the~~borrowing ~~limitations~~under ~~contained in~~ the ~~debtor-in-possession~~DIP ~~credit~~Facility ~~facility;~~as •of ~~the instructions~~May 31, ~~orders~~2008. ~~and~~These amounts ~~decisions~~ of ~~the~~available ~~Bankruptcy~~cash ~~Court~~exclude $18.4 million and ~~other~~$11.5 million ~~effects~~at ofNovember 15, ~~legal~~2008 and ~~administrative proceedings~~May 31, ~~settlements~~ 2008, ~~investigations and claims; • changes in our relationships with suppliers and customers~~respectively, ~~including~~related ~~the ability~~ to ~~maintain~~checks ~~those~~written ~~relationships~~in ~~and~~excess ~~contracts~~of ~~that~~recorded ~~are~~balances ~~critical~~included ~~to our operations,~~ in ~~light~~accounts payable ofon ~~the~~our ~~Chapter~~consolidated 11balance ~~process;~~sheets. •As ~~our~~of ~~ability~~November 15, to2008, ~~maintain~~we ~~adequate~~had ~~liquidity~~borrowed ~~and working capital~~ $113.2 million under ~~our~~the DIP Facility,. asThe ~~well~~DIP asFacility ~~our~~was ~~ongoing~~also ~~ability~~utilized to ~~purchase~~support ~~from vendors on satisfactory terms throughout~~ the ~~reorganization;~~issuance •of ~~the~~letters ~~significant time that will be required by management to structure and implement a plan~~ of credit ~~reorganization~~in ~~as well as to evaluate various alternatives including, but not limited to,~~ the ~~sale~~amount of ~~the~~$141.0 million ~~Company~~primarily orto ~~some~~support ~~or all of~~ our ~~assets,~~workers’ ~~infusion~~compensation ofand ~~capital~~auto liability ~~and~~insurance ~~debt~~programs. ~~restructuring~~The orborrowings ~~any~~and ~~combination~~letters of ~~these~~credit ~~options;~~were •partially ~~our~~collateralized ~~reliance~~by approximately on$21.1 million ~~key management personnel, including the effects~~ of ~~the~~restricted ~~Chapter~~cash 11as ~~process~~required onby ~~our ability to attract and retain key management personnel; • our ability to successfully reject unfavorable contracts and leases; and •~~ the ~~duration~~DIP ~~of the Chapter 11 process~~Facility.

~~General~~The ~~Factors~~DIP Facility subjects us to certain obligations, including, but not limited to, the delivery of financial statements and certifications, cash flow forecasts, and operating budgets at specified intervals and cumulative minimum EBITDA requirements. Furthermore, we are subject to certain limitations on the payment of indebtedness, entering into investments, the payment of capital expenditures, the incurrence of cash restructuring charges and the payment of dividends. Failure to comply with these obligations could lead to an event of default under the DIP Facility and acceleration of payments thereunder.

•In ~~the availability of capital on acceptable terms in light of the various factors discussed herein~~addition, ~~including~~payment ~~our reorganization~~ under the ~~Chapter~~DIP 11Facility ~~process;~~may •be ~~the~~accelerated ~~availability~~following ~~and~~certain ~~cost~~events of ~~raw materials~~default, ~~packaging~~ including, ~~fuels~~but ~~and~~not ~~utilities,~~limited ~~and the ability~~ to, ~~recover these costs in~~ (1) the ~~pricing~~conversion of ~~products,~~any ~~improved~~of ~~efficiencies~~the ~~and~~bankruptcy ~~other~~cases ~~strategies;~~to •a ~~increased~~case ~~pension,~~under Chapter 7 ~~health care, workers’ compensation and other employee costs; • actions~~ of ~~competitors,~~the ~~including~~Bankruptcy ~~pricing~~Code ~~policies and promotional spending; • increased costs, delays~~ or ~~deficiencies related to restructuring activities; •~~ the ~~effectiveness~~appointment of ~~advertising~~a ~~and~~trustee ~~marketing~~pursuant ~~spending;~~to •Chapter 11 ~~the effectiveness and adequacy~~ of ~~our~~the Bankruptcy ~~information and data processing systems~~Code; ~~• changes in general economic and business conditions~~ (~~including the bread and sweet goods markets~~2); our •making ~~costs~~certain ~~associated~~payments ~~with~~of ~~increased~~principal ~~contributions~~or tointerest ~~single~~on ~~employer,~~account ~~multiple~~of pre-petition ~~employer~~indebtedness or ~~multi-employer pension plans~~payables; ~~• any inability to protect~~ and ~~maintain~~(3) a ~~the~~change ~~value~~ of ~~our~~control ~~intellectual~~(as ~~property;~~defined ~~• future product recalls or food safety concerns; • further consolidation~~ in the ~~retail food industry;~~DIP Facility).

45At November 15, 2008, we were in compliance with all financial covenants, terms and conditions of the DIP Facility.

•On ~~changes~~September 12, in2008, ~~consumer~~the ~~tastes~~Bankruptcy orCourt ~~eating~~approved ~~habits;~~the •first ~~costs~~amendment ~~associated with environmental compliance and remediation; • our ability~~ to ~~obtain~~the ~~concessions~~Second ~~from~~Amended ~~our unionized workforce to reduce costs~~ and Restated ~~allow~~Revolving ~~for~~Credit ~~greater~~agreement ~~flexibility in~~ (the ~~method~~First ~~and~~DIP ~~manner~~Amendment). ofThe ~~distributing~~First ~~our~~DIP ~~products;~~Amendment, •among ~~obligations~~other things, ~~and~~(1) increased ~~uncertainties with respect to~~ the ~~ABA~~aggregate ~~Plan;~~principal •amount ~~the~~available ~~impact~~to of$313.0 million, ~~any~~adjusted ~~withdrawal~~for certain ~~liability~~asset ~~arising~~sales ~~under~~to ~~our~~$309.0 million ~~multi-employer~~at ~~pension~~November 15, ~~plans~~2008, aswith a ~~result~~provision offor ~~prior~~additional ~~actions or current consolidations; • actions~~ funding of ~~governmental~~$16.0 million ~~entities,~~based ~~including~~on ~~regulatory requirements; • acceptance of new product offerings by consumers and our ability to expand existing brands; •~~ the ~~performance~~occurrence of ~~our~~certain ~~recent~~events ~~and~~described ~~planned new product introductions, including the success of such new products in achieving and retaining market share~~above; •(2) extended the maturity ~~effectiveness~~date ~~of hedging activities; • expenditures necessary~~ to ~~carry~~February 9, ~~out cost-saving initiatives and savings derived from these initiatives~~2009; •(3) established ~~changes~~minimum inpercentage ~~our~~amounts ~~business~~for ~~strategies;~~Adjusted •LIBOR Rate ~~unexpected~~(as ~~costs~~defined ~~or delays incurred~~ in ~~connection~~the ~~with~~First ~~our~~DIP ~~previously~~Amendment) ~~announced~~ and ~~other~~Alternate ~~future~~Base ~~facility~~Rate ~~closings;~~(as •defined ~~bankruptcy~~in ~~filings~~the byFirst ~~customers;~~DIP Amendment) •used ~~changes~~ in ~~our relationship with employees and~~ the ~~unions~~interest ~~that~~rate ~~represent them~~calculations; •(4) changed the ~~outcome~~borrowing ofbase ~~legal~~formula; ~~proceedings~~and to(5) changed ~~which we are~~ or ~~may~~extended ~~become~~certain acovenants ~~party,~~set ~~including~~forth ~~without~~in ~~limitation~~the ~~any~~DIP ~~litigation~~Facility. ~~stemming~~Fees ~~from~~and ~~our~~expenses ~~sale~~ of approximately ~~convertible~~$7.2 million ~~notes~~were incurred on ~~August~~the ~~12,~~effectiveness ~~2004 or events leading up to our filing~~ of ~~a voluntary petition for protection under Chapter 11 of~~ the ~~Bankruptcy~~First ~~Code;~~DIP ~~• business disruption from terrorist acts, our nation’s response to such acts and acts of war; and • other factors~~Amendment.

~~These~~Since ~~statements~~the ~~speak~~Petition ~~only~~Date, aswe ofhave ~~the~~been ~~date~~actively ofengaged ~~this~~in ~~Quarterly~~restructuring ~~Report~~our operations and selling assets no longer necessary to our operations. We continue to analyze our business based on ~~Form~~a ~~10-Q~~number of factors including, but not limited to, historical sales results, expected future sales results, cash availability, production costs, utilization of resources, and wemanufacturing ~~disclaim~~and distribution ~~any~~efficiencies. ~~intention~~As orpreviously ~~obligation~~stated, toon ~~update~~December 5, or2008 ~~revise~~the ~~any~~Bankruptcy ~~forward-looking~~Court ~~statements~~confirmed our Plan of Reorganization, subject to ~~reflect~~the ~~new~~satisfaction of conditions contained in the Plan. In the event the ~~information~~Plan does not become effective prior to February 9, ~~future~~2009, ~~events~~we ormay ~~developments~~need to seek additional extensions of the maturity date of the DIP Facility or ~~otherwise,~~an ~~except~~increase asin ~~required~~borrowing byavailability ~~law~~under any debtor-in-possession credit facility. ~~All~~There ~~subsequent~~can be no assurance that we will be successful in ~~written~~extending ~~and~~or ~~oral~~increasing ~~forward~~the borrowing availability under the debtor-~~looking~~in-possession ~~statements~~credit ~~attributable~~facility or that we can do so on terms favorable to us. ~~and~~Failure ~~persons~~to ~~acting~~obtain onany ~~our~~such ~~behalf~~extension ~~are qualified~~or increase in borrowing ~~their~~availability ~~entirety~~or byreplacement ~~the~~financing, ~~cautionary~~if ~~statements~~needed, ~~contained~~would inhave ~~this~~a ~~section~~material ~~and~~adverse ~~elsewhere~~impact on ~~herein~~our liquidity and ability to operate as a going concern.

~~Similarly,~~Our ~~these~~future ~~and~~capital ~~other~~requirements ~~factors,~~will ~~including~~depend ~~the~~on ~~terms~~many offactors. ~~any~~While ~~reorganization~~our ~~plan~~Plan ~~ultimately~~reflects our ~~confirmed,~~anticipated ~~can~~future ~~affect~~capital ~~the~~requirement ~~value~~post-emergence, ofat ~~our~~this ~~various~~time ~~pre-petition~~it ~~liabilities,~~is ~~common~~not ~~stock~~possible ~~and/or~~to ~~other~~predict ~~equity~~the ~~securities.~~exact Noamount ~~assurance~~or ~~can~~nature beof ~~given~~our ascapital torequirements. ~~what~~In ~~values~~addition, ifthere ~~any,~~can ~~will~~ be ~~ascribed~~no inguarantee ~~the~~that ~~Chapter 11~~additional ~~proceeding~~capital towill ~~each~~be ofavailable ~~these~~to ~~liabilities~~us, ~~and/~~or ~~securities.~~that ~~Accordingly,~~such wecapital ~~urge~~will ~~that~~be ~~the~~available on favorable ~~appropriate~~terms. ~~caution~~Failure beto ~~exercised~~maintain ~~with~~adequate ~~respect~~sources toof ~~existing~~capital ~~and~~would ~~future~~have ~~investments~~a inmaterial ~~any~~adverse ofimpact ~~these~~on our ~~liabilities~~liquidity and~~/or~~ ~~securities~~ability to continue as a going concern.

4638

Item 3.Table Quantitativeof and Qualitative Disclosure about Market Risk Contents

WeOur financial statements are ~~exposed~~prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, because of the Chapter 11 filing process and our recurring losses from operations, negative working capital, and downward sales trends, along with our potential lack of liquidity should we be unable to successfully ~~market~~reorganize ~~risks~~under ~~relative~~Chapter 11, there is substantial doubt about our ability to ~~commodity~~continue as ~~price~~a ~~fluctuations~~going concern. WeOur ~~actively~~continuation ~~manage~~as ~~these~~a going concern is dependent upon, among other things, ~~risks~~whether ~~through~~the Plan becomes effective, our ability to comply with the ~~use~~terms of ~~forward~~the ~~purchase~~DIP ~~contracts~~Facility, our ability to negotiate an extension of, and ~~derivative~~increase ~~financial~~in ~~instruments.~~the Asamount aavailable under, our DIP Facility, ~~matter~~if ofneeded, ~~policy~~or refinance our DIP Facility at its maturity, weour ~~use~~ability ~~derivative~~to ~~financial~~implement ~~instruments~~our ~~only~~business plan, ~~for~~our ~~hedging~~ability ~~purposes~~to implement the Plan, if it becomes effective, and the ~~use~~transactions contemplated thereby and our ability to generate sufficient cash from operations to meet our obligations and any combination of these factors. In the event our restructuring activities are not successful and we ~~derivatives~~are ~~for~~required ~~trading~~to liquidate, additional significant adjustments would be necessary in the carrying value of assets and ~~speculative~~liabilities, ~~purposes~~the isrevenues ~~prohibited~~and expenses reported and the balance sheet classifications used. Further, the value of debt and equity interests may be significantly or completely impaired in the event of a liquidation or conversion to a Chapter 7 proceeding.

~~Commodity~~OFF-BALANCE ~~Prices~~SHEET FINANCING

~~Commodities~~We wedo ~~use~~not inparticipate ~~the production of our products are subject to wide price fluctuations~~in, ~~depending~~ ~~upon~~nor ~~factors~~secure ~~such~~financings ~~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,~~any ~~sweeteners~~unconsolidated, ~~soybean~~special ~~oil,~~purpose ~~and certain fuels, we sometimes enter into forward purchase contracts and commodity futures and options in order to fix prices for future periods~~entities. A sensitivity analysis was prepared and, based upon our commodity-related derivative positions as of November 17, 2007, an assumed 10% adverse change in commodity prices would not have a material effect on our fair values, future earnings or cash flows.

~~Item 4.~~FINANCIAL ~~Controls~~INFORMATION ~~and~~ABOUT ~~Procedures~~INDUSTRY SEGMENTS

~~(a) Disclosure~~We ~~Controls~~initiated changes in our reporting system effective for the beginning of fiscal 2008, which resulted in the identification of three distinct reportable segments. The three reportable segments were determined by type of customer and ~~Procedures~~distribution method. Management continues to maintain the wholesale operations and retail operations as reporting segments, but renamed them as route revenues and outlet revenues, respectively. The third reporting segment, direct revenues, was established by segregating certain operations previously within wholesale operations that deliver products exclusively through warehouse channels. Our reportable segments are strategic business units that are managed separately using different distribution and marketing strategies.

WeOur ~~maintain~~route disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recordedrevenues, ~~processed,~~formerly ~~summarized~~wholesale ~~and reported within the time periods specified in the SEC’s rules and forms~~operations, ~~and~~consist ~~that~~of ~~such~~an ~~information~~aggregation isof ~~accumulated and communicated to~~ our ~~management,~~eight ~~including~~business ~~our~~units Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that ~~any controls and procedures~~manufacture, ~~no matter how well designed and operated~~distribute, ~~can provide only reasonable assurance of achieving the desired control objectives,~~ and ~~management~~ ~~necessarily~~sell ~~was~~fresh ~~required~~baked togoods ~~apply~~utilizing ~~its~~our ~~judgment~~direct instore ~~evaluating the cost-benefit~~delivery ~~relationship of possible controls and procedures~~system.

Our ~~management~~outlet revenues, ~~with~~formerly ~~the~~retail ~~participation of our Chief Executive Officer and Chief Financial Officer~~operations, ~~has~~ ~~evaluated~~consist ~~the effectiveness~~ of ~~our~~five ~~disclosure~~regions ~~controls and procedures as of November 17, 2007. Based on~~ that ~~evaluation~~sell ~~and due to the existence of material weaknesses in~~ our ~~internal~~baked ~~control~~goods ~~over financial reporting, our Chief Executive Officer~~ and ~~Chief~~other ~~Financial~~food ~~Officer~~items ~~have~~directly ~~concluded that~~to ~~our~~consumers ~~disclosure~~through ~~controls~~company-operated ~~and~~outlet ~~procedures were not effective as of November 17, 2007~~locations.

~~(b) Changes~~Our indirect ~~Internal~~revenues ~~Control~~consist ~~Over~~of ~~Financial~~our ~~Reporting~~direct warehouse shipment program, which ships bulk packaged sweet goods and dry products, such as croutons and stuffing mix, directly to customer-owned distribution centers and public warehouses for distribution.

~~There~~See ~~were~~Note no19. ~~changes~~Segment inInformation ~~our~~to ~~internal~~these ~~control~~condensed ~~over~~consolidated financial ~~reporting~~statements ~~during~~for ~~the quarterly period~~further ~~ended November 17, 2007, except as described below~~information.

~~Management~~RECENT ~~believes~~ACCOUNTING ~~that all of the material weaknesses described under the caption “Item 9A —~~PRONOUNCEMENTS Controls and Procedures” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 2, 2007 existed as of November 17, 2007, and we are continuing to address deficiencies in the Company’s internal controls. Certain of these remediation actions are described under the caption “Item 9A — Controls and Procedures” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 2, 2007. Efforts to remediate and test our internal control over financial reporting are continuing and are expected to continue throughout fiscal 2008 and beyond.

~~During~~See ~~the~~Note ~~second~~2. ~~quarter~~Description of ~~fiscal~~Business ~~2008, the Company continued its implementation of a new human resource management~~ and ~~payroll~~Significant ~~system~~Accounting ~~across~~Policies ~~its~~to ~~operations.~~these ~~As appropriate, the Company is~~condensed ~~modifying~~consolidated ~~the~~financial ~~design~~statements ~~and~~for ~~documentation~~further ofinformation ~~internal~~regarding ~~control~~recently ~~processes~~issued ~~and procedures relating to the~~accounting ~~new system to supplement and complement existing internal controls over financial reporting~~standards.

47FORWARD-LOOKING STATEMENTS

~~PART~~Some IIinformation contained in or incorporated by reference herein may be forward-looking statements within the meaning of the federal securities laws. ~~OTHER~~These ~~INFORMATION~~forward-looking statements are not historical in nature and include statements that reflect, when made, our views with respect to current events and financial performance. These forward-looking statements can be identified by forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “could,” “should” and “continue” or similar words. These forward-looking statements may also use different phrases. These forward-looking statements are not historical in nature and include statements relating to, among other things:

~~Item 1. Legal Proceedings~~39

InTable June 2003, a purported shareholder derivative lawsuit was filed in Missouri state court against certain current and former officers and directors of IBC, seeking damages and other relief. In the case, which is captioned Miller v. Coffey, et al., No. 03-CV-216141 (Cir. Ct., Jackson Cty.), plaintiffs allege that the defendants in this action breached their fiduciary duties to IBC by using material non-public information about IBC to sell IBC stock at prices higher than they could have obtained had the market been aware of the material non-public information. Our Board of Directors previously had received a shareholder derivative demand from the plaintiffs in the June 2003 derivative lawsuit, requesting legal action by us against certain officers and directors of IBC. In response, our Board of Directors appointed a Special Review Committee to evaluate the demand and to report to the board. Prior to our Chapter 11 filing, the parties had agreed to stay the lawsuit until October 11, 2004 and also had initiated preliminary discussions looking towards the possibility of resolving the matter. On November 26, 2007, the circuit court dismissed the lawsuit without prejudice pursuant to local court rules. Contents

As• ~~previously~~our ~~disclosed~~ability into ~~our~~continue ~~fiscal~~as ~~2007~~a ~~Form~~going ~~10-K,~~concern; ~~the~~• ~~South~~our ~~Coast~~ability ~~Air~~to ~~Quality~~consummate ~~Management District~~the ~~in California~~Plan, orwhich ~~SCAQMD,~~was ~~issued~~confirmed aby ~~Notice~~the ofBankruptcy ~~Violation~~Court on ~~June 11~~December 5, ~~2003~~2008; ~~alleging~~• ~~that~~our ~~we had~~ability ~~failed~~to obtain the financing necessary to ~~operate~~implement ~~catalytic~~our ~~oxidizers~~business onplan ~~bakery~~and ~~emissions~~emerge atfrom Chapter 11; • our ~~Pomona,~~ability ~~California~~to ~~facility~~operate ~~in accordance~~pursuant ~~with~~to the ~~conditions~~covenants, terms and certifications of ~~that~~the ~~facility’s~~DIP ~~Clean~~Facility; ~~Air~~• ~~Act~~our ~~Title~~ability Vto ~~Permit.~~successfully ~~Among~~negotiate ~~other~~an ~~things, that~~extension ~~permit~~and ~~requires~~increase ~~that~~in the ~~operating~~amount ~~temperatures~~available ofunder, ~~the~~or ~~catalytic~~refinance, ~~oxidizers~~our beDIP atFacility, ~~least~~if ~~550 degrees~~needed, ~~Fahrenheit.~~which ~~Under~~expires ~~the~~on ~~South~~February ~~Coast~~9, ~~Air~~2009; ~~Quality~~• ~~Management~~our ~~District~~ability ~~rules,~~to ~~violations~~implement ~~of permit~~our ~~conditions~~business ~~are~~plan; ~~subject~~• torisks ~~penalties~~associated ofwith upthird toparties ~~$1,000~~seeking ~~per~~and ~~day,~~obtaining court approval for ~~each~~the ~~day~~appointment of ~~violation.~~a ~~The Notice~~Chapter of11 ~~Violation~~trustee ~~alleges~~or weto ~~were~~convert inthe ~~violation~~Chapter of11 ~~the~~proceeding ~~permit~~to ~~through~~a ~~temperature~~Chapter ~~deviations~~7 ~~on more~~proceeding; ~~than~~• ~~700 days~~risks ~~from~~associated ~~September 1999~~with ~~through~~cost ~~June 2003.~~increases ~~Since~~in ~~that~~materials, ~~time~~ingredients, ~~four~~energy, ~~additional instances~~and ofemployee ~~alleged~~wages ~~violations,~~and ~~some~~benefits; ~~including~~• ~~more~~risks ~~than~~associated ~~one~~with ~~day,~~our ~~have~~restructuring ~~been~~activities, ~~cited~~including by the ~~SCAQMD. We~~risks ~~are~~associated ~~cooperating~~ with achieving the ~~SCAQMD,~~desired ~~have~~savings; ~~taken~~• ~~steps~~our ability to ~~remove~~obtain and maintain adequate terms with vendors and service providers; • the ~~possible~~potential ~~cause~~adverse impact of the ~~deviations alleged~~Chapter in11 ~~the~~proceeding ~~Notice~~on our liquidity or results of ~~Violation,~~operations; ~~applied~~• ~~for~~risks ~~and~~associated ~~received~~with aproduct ~~new~~price ~~permit~~increases, including the risk that such actions will not effectively offset inflationary cost pressures and ~~have~~may ~~replaced~~adversely impact sales of our products; • the ~~oxidizers~~ effectiveness of our efforts to manage our exposure to price increases with arespect ~~single,~~to ~~more~~various ~~effective~~ingredients ~~oxidizer.~~and ~~The~~energy ~~SCAQMD~~through ~~filed~~our ahedging ~~proof~~strategies ofand ~~claim~~our ~~dated~~ability ~~December 8,~~to ~~2004~~hedge ingiven our ~~bankruptcy~~financial ~~case~~condition; ~~for~~• ~~$0.2 million~~our inability ~~civil~~to ~~penalties.~~attract, Wemotivate ~~have~~and/or ~~reached~~retain ankey ~~agreement~~executives and employees; • changes in ~~principle~~ toour ~~settle~~relationship with employees and the ~~SCAQMD~~unions ~~claim~~that ~~through~~represent anthem; ~~allowed,~~• ~~pre-petition,~~successful ~~general~~implementation ~~unsecured~~of ~~claim~~information technology improvements; • successful remediation of material weaknesses in our internal controls; • the ~~amount~~performance of ~~$150~~our recent and planned new product introductions,~~000,~~ ~~which~~including isthe ~~awaiting~~success ~~finalization~~of such new products in achieving and retaining market share; and • the outcome of alegal ~~stipulation~~proceedings to bewhich ~~filed~~we ~~with~~are ~~the Bankruptcy~~or ~~Court~~may become a party.

WeThese ~~record~~forward-looking ~~accruals~~statements ~~for~~are ~~contingencies, such as legal proceedings, in accordance with SFAS No. 5, Accounting for Contingencies. See Note 2. Description of Business~~ and ~~Significant~~will ~~Accounting Policies~~be ~~to these condensed consolidated financial statements for more information. In addition, we are~~ subject to ~~various~~numerous ~~other~~risks ~~routine~~and ~~legal proceedings~~uncertainties, ~~environmental actions and matters in the~~many ~~ordinary course~~ of ~~business,~~which ~~some~~are ofbeyond ~~which~~our ~~may~~control bethat ~~covered~~could incause ~~whole~~actual orresults into ~~part~~differ bymaterially ~~insurance.~~from ~~Except~~such ~~for~~statements. ~~the~~Factors ~~matters~~that ~~disclosed herein, we are not aware of any other items as of this filing which~~ could ~~have~~ acause ~~material~~actual ~~adverse~~results ~~effect~~to ondiffer ~~our~~materially ~~consolidated~~include, ~~financial statements.~~without limitation:

48Bankruptcy-Related Factors

~~Item 2.~~• ~~Unregistered~~the ~~Sales~~significant oftime ~~Equity~~that ~~Securities~~is and ~~Use~~will be required by management to consummate the Plan, as well as to continue to evaluate various alternatives in the event the Plan is not consummated, including, but not limited to, the sale of ~~Proceeds~~ the Company or some or all of our assets, infusion of capital, debt restructuring, or any combination of these options;

~~Issuer Purchases of Equity Securities (A)~~40

					Total Number of		Maximum Number (or
					Shares (or Units)		Approximate Dollar
					Purchased as Part		Value) of Shares (or
	Total Number of		Average Price		of Publicly		Units) that May Yet Be
	Shares (or Units)		Paid per Share		Announced Plans		Purchased Under the
Period	Purchased(B)		(or Unit)		or Programs		Plans or Programs
Period 4 August 26-September 22, 2007		4	$	1.14		4		7,396,618
Period 5 September 23-October 20, 2007		2	$	0.50		2		7,396,616
Period 6 October 21-November 17, 2007		0				0		7,396,616
Total		6	$	0.88		6		7,396,616

(A)		Since May 11, 1999, our Board of Directors has authorized the purchase of approximately 11.0 million shares of our common stock. Prior to the Chapter 11 filing, management had the discretion to determine the number of the shares to be purchased, as well as the timing of any such purchases, with the pricing of any shares repurchased to be at prevailing market prices. As of November 17, 2007, 7,396,616 shares of our common stock were available (or to be purchased) under this stock repurchase program. As a result of our Chapter 11 filing and restrictions imposed by the DIP Facility, however, the program has effectively been suspended since the filing.
(B)		Repurchases resulted from the repurchase of fractional shares upon issuance of certificates representing stock held in the Employee Stock Purchase Plan. This plan was terminated in conjunction with the Chapter 11 filing in September 2004.

	•		our ability to implement our business plan;

	•		our ability to operate our business under the restrictions imposed by the Chapter 11 process and in compliance with the limitations contained in the debtor-in-possession credit facility;

	•		the instructions, orders and decisions of the Bankruptcy Court and other effects of legal and administrative proceedings, settlements, investigations and claims;

	•		changes in our relationships with suppliers and customers, including the ability to maintain those relationships and contracts that are critical to our operations, in light of the Chapter 11 process;

	•		our ability to maintain adequate liquidity and working capital under our DIP Facility, as well as our ongoing ability to purchase from vendors on satisfactory terms throughout the reorganization;

	•		our reliance on key management personnel, including the effects of the Chapter 11 process on our ability to attract and retain key management personnel;

	•		our ability to successfully reject unfavorable contracts and leases; and

	•		the duration of the Chapter 11 process.

49General Factors

~~Item 6.~~• ~~Exhibits~~ the availability of capital on acceptable terms in light of the various factors discussed herein, including our reorganization under the Chapter 11 process; • the availability and cost of raw materials, packaging, fuels and utilities, and the ability to recover these costs in the pricing of products, improved efficiencies and other strategies; • increased pension, health care, workers’ compensation and other employee costs; • actions of competitors, including pricing policies and promotional spending; • increased costs, delays or deficiencies related to restructuring activities; • the effectiveness of advertising and marketing spending; • the effectiveness and adequacy of our information and data processing systems; • changes in general economic and business conditions (including the bread and sweet goods markets); • costs associated with increased contributions to single-employer, multiple employer or multi-employer pension plans; • any inability to protect and maintain the value of our intellectual property; • future product recalls or food safety concerns; • further consolidation in the retail food industry; • changes in consumers’ eating habits and dietary preferences; • costs associated with environmental compliance and remediation; • the impact of any withdrawal liability arising under our multi-employer pension plans as a result of prior

Exhibit No.		Exhibit
3.1		Restated Certificate of Incorporation of Interstate Bakeries Corporation, as amended (incorporated herein by reference to Exhibit 3.1 to Interstate Bakeries Corporation’s Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarter ended March 9, 2002, filed on April 19, 2002).
3.1.1		Certificate of Amendment to the Restated Certificate of Incorporation of Interstate Bakeries Corporation (incorporated herein by reference to Exhibit 3.1 to Interstate Bakeries Corporation’s Form 8-K filed on March 21, 2007).
3.2		Restated Bylaws of Interstate Bakeries Corporation (incorporated herein by reference to Exhibit 3.1 to Interstate Bakeries Corporation’s Quarterly Report on Form 10-Q for the quarter ended November 15, 2003 filed on December 22, 2003).
3.2.1		Amendment Number One to the Restated Bylaws of Interstate Bakeries Corporation (incorporated herein by reference to Exhibit 3.2 to Interstate Bakeries Corporation’s Form 8-K filed on March 21, 2007).
4.1		Preferred Stock Purchase Rights Agreement effective as of May 8, 2000 (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on May 16, 2000).
10.1		Employment Agreement by and among Interstate Bakeries Corporation, Interstate Brands Corporation and Craig D. Jung, dated January 30, 2007 (incorporated herein by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Form 8-K filed on January 31, 2007).
10.2		Employment Agreement, dated as of April 25, 2007, by and among Interstate Brands Corporation, Interstate Bakeries Corporation and Kent B. Magill (incorporated herein by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Form 8-K filed on June 6, 2007).
10.3		Employment Agreement dated as of March 8, 2003 by and between Michael D. Kafoure and Interstate Brands West Corporation (incorporated herein by reference to Exhibit 10.2 to Interstate Bakeries Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 8, 2003, filed April 22, 2003).
10.4		Employment Agreement dated as of March 7, 2003 by and between Robert P. Morgan and Interstate Brands Corporation (incorporated herein by reference to Exhibit 10.3 to Interstate Bakeries Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 8, 2003, filed April 22, 2003).
10.5		Employment Agreement dated as of March 18, 2003 by and between Richard D. Willson and Interstate Brands West Corporation (incorporated herein by reference to Exhibit 10.4 to Interstate Bakeries Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 8, 2003, filed April 22, 2003).
10.6		Form of Management Continuity Agreement effective as of February 3, 2003 by and between Interstate Bakeries Corporation and Michael D. Kafoure, Kent B. Magill, Robert P. Morgan and Richard D. Willson (incorporated herein by reference to Exhibit 10.7 to Interstate Bakeries Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 8, 2003, filed April 22, 2003).
10.7		Amended and Restated Credit Agreement among Interstate Bakeries Corporation, as a Guarantor, Interstate Brands Corporation and Interstate Brands West Corporation, each as a Borrower, the several Lenders from time to time parties hereto, and The Chase Manhattan Bank, as Administrative Agent, dated as of April 25, 2002 (incorporated herein by reference to Exhibit 10.3

50 Table of Contents

Exhibit No.		Exhibit
		to Interstate Bakeries Corporation’s Amendment No. 2 to its Registration Statement on Form S-3, File No. 333-86560, filed May 8, 2002).
10.7.1		First Amendment, dated as of April 21, 2003, to the Amended and Restated Credit Agreement among Interstate Bakeries Corporation, as a Guarantor, Interstate Brands Corporation and Interstate Brands West Corporation, each as a Borrower, the several Lenders from time to time parties hereto, and The Chase Manhattan Bank, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 8, 2003, filed April 22, 2003).
10.7.2		Second Amendment, dated as of May 7, 2004, to the Amended and Restated Credit Agreement among Interstate Bakeries Corporation, as a Guarantor, Interstate Brands Corporation and Interstate Brands West Corporation, each as a Borrower, the several Lenders from time to time parties hereto, and The Chase Manhattan Bank, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 12, 2004).
10.7.3		Third Amendment, dated as of May 27, 2004, to the Amended and Restated Credit Agreement among Interstate Bakeries Corporation, as a Guarantor, Interstate Brands Corporation and Interstate Brands West Corporation, each as a Borrower, the several Lenders from time to time parties hereto, and The Chase Manhattan Bank, as Administrative Agent (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 12, 2004).
10.7.4		Fourth Amendment, dated as of June 17, 2004, to the Amended and Restated Credit Agreement among Interstate Bakeries Corporation, as a Guarantor, Interstate Brands Corporation and Interstate Brands West Corporation, each as a Borrower, the several Lenders from time to time parties hereto, and The Chase Manhattan Bank, as Administrative Agent (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 12, 2004).
10.7.5		Fifth Amendment, dated as of August 12, 2004, to the Amended and Restated Credit Agreement among Interstate Bakeries Corporation, as a Guarantor, Interstate Brands Corporation and Interstate Brands West Corporation, each as a Borrower, the several Lenders from time to time parties hereto, and The Chase Manhattan Bank, as Administrative Agent (incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 12, 2004).
10.7.6		Sixth Amendment, dated as of September 7, 2004, to the Amended and Restated Credit Agreement, dated April 25, 2002, among Interstate Bakeries Corporation, as a Guarantor, Interstate Brands Corporation and Interstate Brands West Corporation, each as a Borrower, the several Lenders from time to time parties thereto, The Bank of Nova Scotia, BNP Paribas, Cooperatieve Central Raiffeisen-Boerenleenbank B.A., “Rabobank International”, New York Branch, and SunTrust Bank, each as a co-documentation agent, Bank of America, N.A., as syndication agent and JPMorgan Chase Bank, as administrative agent (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on September 13, 2004).
10.7.7		Seventh Amendment to the Amended and Restated Credit Agreement dated as of March 18, 2005, by and among the Interstate Bakeries Corporation, Interstate Brands Corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties thereto (the “Lenders”), The Bank of Nova Scotia, BNP Paribas, Cooperatieve Central Raiffeisen-Boerenleenbank B.A., “Rabobank International”, New York Branch, and SunTrust Bank, each as a co-documentation agent (the “Co-Documentation Agents”), Bank of America, N.A., as syndication agent (the “Syndication Agent”) and JPMorgan Chase Bank (“JPMorgan”), as administrative agent (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries

			actions or current consolidations;

	•		actions of governmental entities, including regulatory requirements;

	•		acceptance of new product offerings by consumers and our ability to expand existing brands;

	•		the performance of new product introductions, including the success of such new products in achieving and retaining market share;

	•		the effectiveness of hedging activities;

	•		expenditures necessary to carry out cost-saving initiatives and savings derived from these initiatives;

	•		changes in our business strategies;

	•		unexpected costs or delays incurred in connection with facility closings;

	•		bankruptcy filings by customers;

	•		changes in our relationship with employees and the unions that represent them;

	•		the outcome of legal proceedings to which we are or may become a party, including without limitation any litigation stemming from our sale of convertible notes on August 12, 2004 or events leading up to our filing of a voluntary petition for protection under Chapter 11 of the Bankruptcy Code;

	•		business disruption from terrorist acts, our nation’s response to such acts and acts of war; and

	•		other factors.

51These statements speak only as of the date of this report, and we disclaim any intention or obligation to update or revise any forward-looking statements to reflect new information, future events or developments or otherwise, 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 herein.

Exhibit No.		Exhibit
		Corporation filed on March 22, 2005).
10.8		Guarantee and Collateral Agreement made by Interstate Bakeries Corporation, Interstate Brands Corporation, Interstate Brands West Corporation and certain of their Subsidiaries, in favor of The Chase Manhattan Bank, as Administrative Agent, dated as of July 19, 2001 (incorporated herein by reference to Exhibit 10.4 to the Annual Report on Form 10-K of Interstate Bakeries Corporation filed on August 24, 2001).
10.9		Amended and Restated Interstate Bakeries Corporation 1996 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 6, 2004 filed on April 19, 2004).
10.10		Interstate Bakeries Corporation Incentive Compensation Plan (incorporated herein by reference to Interstate Bakeries Corporation Amendment No. 2 to its Registration Statement on Form S-3, File No. 333-86560, filed on May 8, 2002).
10.11		Interstate Bakeries Corporation Amended and Restated Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10.15 to Interstate Bakeries Corporation’s Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).
10.12		Interstate Bakeries Corporation Rabbi Trust Agreement (incorporated herein by reference to Exhibit 10.8 to the Annual Report on Form 10-K of Interstate Bakeries Corporation filed on August 23, 2002).
10.12.1		First Amendment to the IBC Rabbi Trust Agreement effective August 8, 2003 (incorporated herein by reference to Exhibit 10.19.1 to Interstate Bakeries Corporation’s Annual Report on Form 10-K filed on August 23, 2003).
10.13		Form of Award Notice and Non-Qualified Stock Option Agreement pursuant to the Interstate Bakeries Corporation 1996 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.9 to the Annual Report on Form 10-K of Interstate Bakeries Corporation filed on August 23, 2002).
10.14		Form of Award Notice and Incentive Stock Option Agreement pursuant to the Interstate Bakeries Corporation 1996 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Annual Report on Form 10-K of Interstate Bakeries Corporation filed on August 23, 2002).
10.15		Form of Indenture for 6.0% Senior Subordinated Convertible Notes Due 2014 (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 12, 2004).
10.16		Form of Purchase Agreement for 6.0% Senior Subordinated Convertible Notes Due 2014 (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 12, 2004).
10.17		Form of Registration Rights Agreement for 6.0% Senior Subordinated Convertible Notes Due 2014 (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 12, 2004).
10.18		Letter Agreement, dated as of August 27, 2004, amended and restated as of September 21, 2004 and further amended and restated on October 14, 2004, by and between Alvarez and Marsal, Inc. and Interstate Bakeries Corporation, Armour & Main Redevelopment Corporation, Baker’s Inn Quality Baked Goods, LLC, IBC Sales Corporation, IBC Services, LLC, IBC Trucking LLC, Interstate Brands Corporation, New England Bakery Distributors, LLC and Mrs. Cubbison’s Foods, Inc (incorporated herein by reference to Exhibit 10.24 to Interstate Bakeries Corporation’s Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

52Not applicable.

Exhibit No.		Exhibit
10.18.1		Letter Agreement, dated as of July 18, 2005, by and between Alvarez and Marsal, Inc. and Interstate Bakeries Corporation, Armour & Main Redevelopment Corporation, Baker’s Inn Quality Baked Goods, LLC, IBC Sales Corporation, IBC Services, LLC, IBC Trucking LLC, Interstate Brands Corporation, New England Bakery Distributors, LLC and Mrs. Cubbison’s Foods, Inc (incorporated herein by reference to Exhibit 10.24.1 to Interstate Bakeries Corporation’s Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).
10.19		Revolving Credit Agreement, dated as of September 23, 2004, among Interstate Bakeries Corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, and each of the direct and indirect subsidiaries of the Parent Borrower party to this Agreement (each individually a “Subsidiary Borrower” and collectively the “Subsidiary Borrowers”; and together with the Parent Borrower, the “Borrowers”), each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code (the cases of the Borrowers, each a “Case” and collectively, the “Cases”), JPMorgan Chase Bank (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party hereto (together with JPMCB, the “Lenders”), J.P. Morgan Securities Inc., as lead arranger and book runner, JPMorgan Chase Bank, as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders, and JPMorgan Chase Bank, as collateral agent (in such capacity, the “Collateral Agent”) for the Lenders (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on September 27, 2004).
10.19.1		First Amendment, dated as of November 1, 2004, to the Revolving Credit Agreement) dated as of September 23, 2004, among Interstate Bakeries Corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, and each of the direct and indirect subsidiaries of the Parent Borrower party to this Agreement (each individually a “Subsidiary Borrower” and collectively the “Subsidiary Borrowers”; and together with the Parent Borrower, the “Borrowers”), each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code (the cases of the Borrowers, each a “Case” and collectively, the “Cases”), JPMorgan Chase Bank (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party hereto (together with JPMCB, the “Lenders”), J.P. Morgan Securities Inc., as lead arranger and book runner, JPMorgan Chase Bank, as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders, and JPMorgan Chase Bank, as collateral agent (in such capacity, the “Collateral”) for the Lenders (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on November 5, 2004).
10.19.2		Second Amendment, effective as of January 20, 2005, to the Revolving Credit Agreement, dated as of September 23, 2004, among Interstate Bakeries Corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, and each of the direct and indirect subsidiaries of the Parent Borrower party to this Agreement (each individually a “Subsidiary Borrower” and collectively the “Subsidiary Borrowers”; and together with the Parent Borrower, the “Borrowers”), each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code (the cases of the Borrowers, each a “Case” and collectively, the “Cases”), JPMorgan Chase Bank (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party hereto (together with JPMCB, the “Lenders”), J.P. Morgan Securities Inc., as lead arranger and book runner, JPMorgan Chase Bank, as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders, and JPMorgan Chase Bank, as collateral agent (in such capacity, the “Collateral”) for the Lenders (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on February 1, 2005).
10.19.3		Third Amendment and Waiver, dated as of May 26, 2005, to the Revolving Credit Agreement, dated as of September 23, 2004, as amended, among Interstate Bakeries Corporation, a Delaware corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent

Item 4. Controls and Procedures

53(a) Disclosure Controls and Procedures

Exhibit No.		Exhibit
		Borrower (each individually a “Subsidiary Borrower” and collectively the “Subsidiary Borrowers”; and together with the Parent Borrower, the “Borrowers”), each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Credit Agreement (together with JPMCB, the “Lenders”), JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as administrative agent (the “Administrative Agent”) for the Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as collateral agent (the “Collateral Agent”) for the Lenders (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on May 27, 2005).
10.19.4		Fourth Amendment and Waiver, dated as of November 30, 2005, to the Revolving Credit Agreement, dated as of September 23, 2004, as amended, among Interstate Bakeries Corporation, a Delaware corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower (each individually a “Subsidiary Borrower” and collectively the “Subsidiary Borrowers”; and together with the Parent Borrower, the “Borrowers”), each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Credit Agreement (together with JPMCB, the “Lenders”), JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as administrative agent (the “Administrative Agent”) for the Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as collateral agent (the “Collateral Agent”) for the Lenders (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on December 5, 2005).
10.19.5		Fifth Amendment, dated as of December 27, 2005, to the Revolving Credit Agreement, dated as of September 23, 2004, as amended, among Interstate Bakeries Corporation (“Parent Borrower”), a Delaware corporation, a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Credit Agreement (together with JPMCB, the “Lenders”), JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as collateral agent for the Lenders (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on December 30, 2005).
10.19.6		Sixth Amendment, dated as of March 29, 2006, to the Revolving Credit Agreement, dated as of September 23, 2004, as amended, among Interstate Bakeries Corporation (“Parent Borrower”), a Delaware corporation, a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and certain of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Credit Agreement (together with JPMCB, the “Lenders”), JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as collateral agent for the Lenders (incorporated herein by reference to

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

54Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of November 15, 2008. Based on that evaluation and

Exhibit No.		Exhibit
		the Current Report on Form 8-K of Interstate Bakeries Corporation filed on March 29, 2006).
10.19.7		Seventh Amendment, dated as of June 28, 2006, to the Revolving Credit Agreement, dated as of September 23, 2004, as amended, among Interstate Bakeries Corporation (“Parent Borrower”), a Delaware corporation, a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Credit Agreement (together with JPMCB, the “Lenders”), JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as collateral agent for the Lenders (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on June 30, 2006).
10.19.8		Eighth Amendment, dated as of August 25, 2006, to the Revolving Credit Agreement, dated as of September 23, 2004, as amended, among Interstate Bakeries Corporation (“Parent Borrower”), a Delaware corporation, a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Credit Agreement (together with JPMCB, the “Lenders”), JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as collateral agent for the Lenders (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 30, 2006).
10.19.9		Ninth Amendment, dated as of February 16, 2007, to the Revolving Credit Agreement, dated as of September 23, 2004, as amended, among Interstate Bakeries Corporation (“Parent Borrower”), a Delaware corporation, a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Credit Agreement (together with JPMCB, the “Lenders”), JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as administrative agent for the Lenders, and JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank), as collateral agent for the Lenders (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on February 16, 2007).
10.19.10		First Amendment, dated as of October 1, 2007, to the Amended and Restated Revolving Credit Agreement, dated as of February 16, 2007, as amended, among Interstate Bakeries Corporation, a Delaware corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and certain of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Amended and Restated Revolving Credit Agreement (together with JPMCB, the “Lenders”), and JPMCB as administrative agent and collateral agent for the Lenders (incorporated by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Form 8-K filed on October 2, 2007).

55 Table of Contents

Exhibit No.		Exhibit
10.19.11		Second Amendment, dated as of November 29, 2007, to the Amended and Restated Revolving Credit Agreement, dated as of February 16, 2007, as amended, among Interstate Bakeries Corporation, a Delaware corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and certain of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Amended and Restated Revolving Credit Agreement (together with JPMCB, the “Lenders”), and JPMCB as administrative agent and collateral agent for the Lenders (incorporated by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Form 8-K filed on December 3, 2007).
10.19.12		Third Amendment, dated as of December 19, 2007, to the Amended and Restated Revolving Credit Agreement, dated as of February 16, 2007, as amended, among Interstate Bakeries Corporation, a Delaware corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the direct and indirect subsidiaries of the Parent Borrower, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (formerly known as JPMorgan Chase Bank) (“JPMCB”), and certain of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Amended and Restated Revolving Credit Agreement (together with JPMCB, the “Lenders”), and JPMCB as administrative agent and collateral agent for the Lenders (incorporated by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Form 8-K filed on December 19, 2007).
10.20		Offer of Employment dated July 13, 2005 between Interstate Bakeries Corporation and Mr. Richard C. Seban (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on August 5, 2005).
10.21		Interstate Bakeries Corporation Key Employee Retention Plan (incorporated herein by reference to Exhibit 10.27 to Interstate Bakeries Corporation’s Annual Report on Form 10-K for the year ended May 29, 2004, filed October 6, 2006).
10.22		Consulting Agreement dated July 27, 2007 by and among Interstate Brands Corporation and Interim LLC (incorporated herein by reference to the Quarterly Report on Form 10-Q for the quarter ended August 25, 2007, filed on October 4, 2007).
10.23		Consulting Agreement dated July 27, 2007 by and among Interstate Brands Corporation and Miller Management Group, Inc. (incorporated herein by reference to the Quarterly Report on Form 10-Q for the quarter ended August 25, 2007, filed on October 4, 2007).
10.24		Consulting Agreement dated July 27, 2007 by and among Interstate Brands Corporation and Timpanagos Consulting LLC (incorporated herein by reference to the Quarterly Report on Form 10-Q for the quarter ended August 25, 2007, filed on October 4, 2007).
31.1		Certification of Craig D. Jung pursuant to Rule 13a-14(a)/15d-14(a)*
31.2		Certification of J. Randall Vance pursuant to Rule 13a-14(a)/15d-14(a)*
32.1		Certification of Craig D. Jung pursuant to 18 U.S.C. Section 1350*
32.2		Certification of J. Randall Vance pursuant to 18 U.S.C. Section 1350*

due to the existence of material weaknesses in our internal control over financial reporting, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of November 15, 2008.

*(b) Changes ~~Filed~~in ~~herewith~~Internal Control Over Financial Reporting

56There were no changes in our internal control over financial reporting during the quarterly period ended November 15, 2008.

~~SIGNATURES~~Management believes that all of the material weaknesses described under the caption “Item 9A — Controls and Procedures” in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2008 existed as of November 15, 2008, and we are continuing to address deficiencies in the Company’s internal controls. Certain of these remediation efforts are described under the caption “Item 9A — Controls and Procedures” in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2008. Efforts to remediate and test our internal control over financial reporting are continuing and are expected to continue throughout fiscal 2009 and beyond.

~~Pursuant~~As topreviously ~~the~~stated, ~~requirements~~on September 22, 2004, we filed a voluntary petition for relief under Chapter 11 of ~~Section 13~~the orUnited 15States Bankruptcy Code (dthe “Bankruptcy Code”) ofin the ~~Securities~~United ~~Exchange~~States ~~Act~~Bankruptcy Court for the Western District of ~~1934~~Missouri (the “Bankruptcy Court”). Since that time, we have worked diligently to remediate the material weaknesses first identified in the management’s annual ~~Registrant~~report ~~has~~on ~~duly~~internal ~~caused~~control ~~this~~over financial reporting (“Management’s Report”) toincluded bein ~~signed~~the Form 10-K for the fiscal year ended May 28, 2005 (the “2005 Form 10-K”) filed on October 6, 2006 and has successfully remediated nine of the eleven material weaknesses identified therein. However, as noted in its ~~behalf~~Form by10-Q for the ~~undersigned~~fiscal quarter ended August 23, ~~thereunto~~2008, the Company continues its ~~duly~~efforts ~~authorized~~to remediate the remaining two material weaknesses related to insufficient resources and use of third party specialists (collectively, the “Continuing Material Weaknesses”) described in its Form 10-K for the fiscal year ended May 31, 2008.

	INTERSTATE BAKERIES CORPORATION
Dated: December 20, 2007	By:	/s/ Craig D. Jung
		Craig D. Jung
		Chief Executive Officer
		(Principal Executive Officer)
Dated: December 20, 2007	By:	/s/ J. Randall Vance
		J. Randall Vance
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

The Continuing Material Weaknesses were first identified by management during the fiscal year ended June 3, 2006 in connection with preparing the Management’s Report included in the 2005 Form 10-K. While we believe that the Continuing Material Weaknesses existed prior to the time they were identified, and believe they most likely existed prior to its Chapter 11 filing, we are unable to determine with any precision when they first began.

57The material weakness related to insufficient resources is associated with the ineffective control environment described in the Management’s Report included in the 2005 Form 10-K. We have substantially remediated our overall control environment but have not been able to remediate the more specific material weakness related to insufficient resources. In recent years, we have experienced a pervasive shortage of qualified employee resources in key control areas such as finance and accounting, benefits and information technology functions. This shortage has been exacerbated by the Chapter 11 process and the related ongoing challenge of recruiting, training and retaining talent in key control areas. Our Chapter 11 process has lasted over four years and there have been many obstacles to our efforts to emerge from Chapter 11 that, collectively, have made it extremely difficult to remediate this weakness. In order to compensate for this shortage, we have and will continue to utilize outside consultants to address shortfalls in staffing and to assist us with accounting, benefits and information technology responsibilities. While it is difficult to estimate with certainty, we have incurred millions of dollars in consulting fees. We do not expect that we will be in a position to remediate this material weakness until we emerge from Chapter 11 and are able to offer an attractive employment opportunity to the necessary personnel to replace the outside consultants currently being utilized. Although the employment costs associated with the new employees may be at least partially offset by the elimination of the existing consulting fees we are paying, we cannot presently determine the ultimate costs we will incur to remediate this material weakness.

The material weakness related to the use of third party specialists also has been exacerbated by the Chapter 11 process and its impact on the our ability to hire qualified employees as previously discussed. We have incurred approximately $17 million to centralize data related to payroll processes in an effort to partially remediate the weakness. In addition, we have and will continue to improve controls over the review and accuracy of data we provide to third party specialists by data review, data cleansing and automation and centralization of record keeping. We expect to hire additional qualified employees once we emerge from Chapter 11 to manage these responsibilities. As with the material weakness discussed above, although the employment costs associated with the new employees may be at least partially offset by the elimination of the existing consulting fees we are paying, we cannot presently determine the ultimate costs we will incur to remediate this material weakness.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As previously disclosed in our fiscal 2009 first quarter Form 10-Q, R² Investments, LDC (R² Investments) filed an action on September 5, 2008 in the Circuit Court of Jackson County, Missouri, Case No. 0816-27077, against certain of our former and current directors and a former officer stating a cause of action based upon alleged negligent misrepresentations made by the named defendants in connection with our issuance of $100.0 million aggregate principal amount of 6.0% senior subordinated convertible notes due August 15, 2014 (the Convertible Notes). The action sought recovery of the total amount of the Convertible Notes held by the plaintiff plus accrued interest. On December 9, 2008, upon consideration of a stipulation for dismissal unilaterally filed by the plaintiff, the Circuit Court entered an Order dismissing this action without prejudice.

As last disclosed in our fiscal 2008 Form 10-K, we are involved in a dispute regarding the proper characterization of the American Bakers Association Retirement Plan, or ABA Plan. We believe that the ABA Plan has been historically administered as a multiple employer plan under ERISA and tax rules and should be treated as such. The ABA Plan contends it should be treated as an aggregate of single-employer plans under ERISA, which is also how it is reflected in our financial statements. We have historically reflected our interest in the ABA Plan as an aggregate of single-employer plans despite our position on the proper characterization of the ABA Plan due to representations we received from the ABA Plan and a 1979 determination issued by the Pension Benefit Guaranty Corporation (PBGC) (as discussed below). However, the PBGC, which is the federal governmental agency that insures and supervises defined benefit pension plans, revisited its 1979 determination that the ABA Plan was an aggregate of single-employer plans and after reviewing the status of the ABA Plan, on August 8, 2006, made a final determination that the ABA Plan is a multiple employer plan under ERISA. On August 9, 2006, we filed a lawsuit in Bankruptcy Court seeking enforcement of the PBGC’s determination, but there can be no assurance as to whether we will obtain such enforcement or the amount of any reduction to our net benefit obligation liability.

On May 3, 2006, Sara Lee Corporation instituted proceedings against the ABA Plan and the Board of Trustees of the Plan (the “Board of Trustees”) in the United States District Court for the District of Columbia. Sara Lee Corporation v. American Bakers Ass’n Retirement Plan, et al., Case No. 1:06-cv-00819-HHK (D.D.C.) (the “Sara Lee Litigation”). The relief Sara Lee seeks includes, among other things, a mandatory injunction that would compel the ABA Plan and the Board of Trustees to (i) require all participating employers in the ABA Plan with negative asset balances — which would include the Company — to make payments to the Plan in order to maintain a positive asset balance and (ii) cut off the payment from the ABA Plan of benefits to employee-participants of the Company and other participating employers with negative asset balances, to the extent such employers did not maintain a positive balance. However, the Sara Lee Litigation is premised on the notion that the ABA Plan is an aggregate of single-employer plans, which is inconsistent with the PBGC’s determination dated August 8, 2006 that the ABA Plan is a multiple employer plan. On September 29, 2006, Sara Lee filed an amended complaint adding the PBGC as a defendant and challenging the PBGC’s August 8, 2006 determination. In order to obtain a resolution of these matters without litigation over the proper forum, we have voluntarily stayed our lawsuit in Bankruptcy Court seeking enforcement of the August 8, 2006 determination upon the agreement by the ABA Plan and its Board of Trustees to join IBC as a party to the Sara Lee Litigation.

On November 22, 2006, the ABA Plan and the Board of Trustees filed a motion in the bankruptcy court seeking an order requiring IBC to file an application with the Internal Revenue Service requesting a waiver of the minimum funding requirements applicable to the ABA Plan or, in the alternative, make $3.9 million of contributions to the ABA Plan no later than June 15, 2007. On December 8, 2006, the Bankruptcy Court denied the ABA motion.

On April 4, 2007, the PBGC filed a motion for summary judgment in the Sara Lee case asking the court to enforce the PBGC’s August 8, 2006 determination that the ABA Plan is a multiple employer plan. Briefing on the PBGC’s motion for summary judgment concluded on June 8, 2007, and oral argument was heard on July 2, 2007. On September 11, 2007, the District Court issued a partial ruling on the PBGC’s motion for summary judgment. In its opinion, the District Court agreed with the PBGC and IBC as to the requisite standard for its review, but declined to review the PBGC’s August 8, 2006 determination until after it could decide whether the administrative record filed by the PBGC was complete. On August 27, 2008, the District Court ruled that the administrative record was complete. We now await the District Court’s ruling on the PBGC’s August 8, 2006 determination.

Effective November 7, 2008, we withdrew from the ABA Plan. Consequently, we have ceased any and all contributions and contributory obligations to the ABA Plan. Given the uncertainty of the outcome of the Sara Lee Litigation, we entered into Compromise and Settlement Agreements with both the PBGC and the ABA Plan in order to fix our liability with regard to the ABA Plan.

We entered into a Compromise and Settlement Agreement with the PBGC, which was approved by the Bankruptcy Court on November 13, 2008. The agreement provides that (i) the PBGC will be granted an allowed pre-petition general unsecured claim in the amount of $17.5 million; and (ii) if and only if the ABA Plan is ultimately determined in the Sara Lee Litigation to be an aggregate of single-employer plans, the PBGC will be granted an allowed pre-petition general unsecured claim in the amount of $72.5 million.

Similarly, we entered into a Compromise and Settlement Agreement with the ABA Plan, which was approved by the Bankruptcy Court on December 15, 2008. The agreement provides that the ABA Plan will be granted (i) an allowed pre-petition general unsecured claim in the amount of $6.0 million; and (ii) an allowed administrative expense claim in the amount of $0.8 million.

We record accruals for contingencies, such as legal proceedings, in accordance with SFAS No. 5, Accounting for Contingencies. See Note 2. Description of Business and Significant Accounting Policies to our consolidated financial statements for more information. In addition, we are subject to various other routine legal proceedings, environmental actions and matters in the ordinary course of business, some of which may be covered in whole or in part by insurance. Except for the matters disclosed herein, we are not aware of any other items as of this filing which could have a material adverse effect on our consolidated financial statements.

Item 1A. Risk Factors

The following risk could materially and adversely affect our financial condition, results of operation and cash flows. For additional risk factors, see “Part I. Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended May 31, 2008.

There are significant issues remaining with respect to the satisfaction of the conditions to our ability to emerge from Chapter 11 pursuant to our Plan.

Under the terms of the Plan, we cannot emerge from Chapter 11 until our exit financing commitments are consummated. Since the Plan was confirmed, we have focused our efforts on negotiating and finalizing all documentation for these exit financings and satisfying the remaining conditions precedent to closing of the various transactions contemplated under the Plan, including the debt and equity financing commitments. Although progress has been made, significant issues remain to be resolved, including with respect to the exit financings and conditions precedent to funding under the various commitments. No assurance can be given that the exit financings will be closed and that the Plan will become effective. Further, in the event that one or more of the parties committed to provide the exit financing refuse or fail to perform under their respective commitments, we may seek to enforce our rights under the financing commitments or seek to replace any such financing or financings. There can be no assurance that any attempt to enforce the commitments or to obtain replacement financing will be successful.

In the event that our Plan does not become effective, we will continue our efforts to maximize the value of the bankruptcy estates, which may include, but not be limited to, the sale of the Company or some or all of our assets, infusion of capital, debt restructuring or any combination of these options. There can be no assurance as to whether we will be able to successfully implement any such strategy on terms and conditions acceptable to us or to our

various constituents in the bankruptcy, and absent the ability to pursue such a strategy, we expect to begin an orderly wind-down of our operations. There can be no assurance as to the ultimate recovery of value available to our constituents should our Plan not be consummated.

Item 6. Exhibits


Exhibit No.		Exhibit

3.1		Restated Certificate of Incorporation of Interstate Bakeries Corporation, as amended (incorporated herein by reference to Exhibit 3.1 to Interstate Bakeries Corporation’s Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarter ended March 9, 2002, filed on April 19, 2002).

3.1.1		Certificate of Amendment to the Restated Certificate of Incorporation of Interstate Bakeries Corporation (incorporated herein by reference to Exhibit 3.1 to Interstate Bakeries Corporation’s Form 8-K filed on March 21, 2007).

3.2		Restated Bylaws of Interstate Bakeries Corporation (incorporated herein by reference to Exhibit 3.1 to Interstate Bakeries Corporation’s Quarterly Report on Form 10-Q for the quarter ended November 15, 2003 filed on December 22, 2003).

3.2.1		Amendment Number One to the Restated Bylaws of Interstate Bakeries Corporation (incorporated herein by reference to Exhibit 3.2 to Interstate Bakeries Corporation’s Form 8-K filed on March 21, 2007).

4.1		Preferred Stock Purchase Rights Agreement effective as of May 8, 2000 (incorporated herein by reference to the Current Report on Form 8-K of Interstate Bakeries Corporation filed on May 16, 2000).

10.1		Fee Letter, dated September 12, 2008, among Interstate Bakeries Corporation and IBC Investors I, LLC (incorporated herein by reference to the Current Report on Form 8-K filed on September 16, 2008).

10.2		Commitment Letter, dated September 12, 2008, among Interstate Bakeries Corporation, Interstate Brands Corporation, General Electric Capital Corporation and GE Capital Markets, Inc. (incorporated herein by reference to the Current Report on Form 8-K filed on September 16, 2008).

10.2.1		Amendment, dated as of December 5, 2008, to the Commitment Letter, dated as of September 12, 2008, among General Electric Capital Corporation, Interstate Bakeries Corporation, Interstate Brands Corporation and IBC Investors I, LLC (incorporated herein by reference to the Current Report on Form 8-K filed on December 5, 2008).

10.3		Commitment Letter, dated September 12, 2008, among Interstate Bakeries Corporation, Interstate Brands Corporation, Silver Point Finance, LLC and Monarch Master Funding Ltd. (incorporated herein by reference to the Current Report on Form 8-K filed on September 16, 2008).

10.3.1		Amendment, dated as of December 4, 2008, to the Commitment Letter, dated as of September 12, 2008, among Interstate Bakeries Corporation, Interstate Brands Corporation, Silver Point Finance, LLC and Monarch Master Funding Ltd. (incorporated herein by reference to the Current Report on Form 8-K filed on December 5, 2008).

10.4		Fee Letter, dated September 12, 2008, among Interstate Bakeries Corporation, Interstate Brands Corporation, Silver Point Finance, LLC and Monarch Master Funding Ltd. (incorporated herein by reference to the Current Report on Form 8-K filed on September 16, 2008).

10.5		First Amendment to the Second Amended and Restated Revolving Credit Agreement, dated as of September 12, 2008, by and among Interstate Bakeries Corporation, a Delaware corporation (“Parent Borrower”), a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, each of the wholly-owned direct and indirect subsidiaries of the Parent Borrower party to the DIP Agreement, each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, JPMorgan Chase Bank, N.A., a national banking association (“JPMCB”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the DIP Agreement (together with JPMCB, the “Lenders”), J.P. Morgan Securities Inc., as lead arranger and book runner, and JPMCB as administrative agent and collateral agent for the Lenders (incorporated herein by reference to the Current Report on Form 8-K filed on September 16, 2008).

10.6		Investment Agreement, dated as of September 26, 2008, between Interstate Bakeries Corporation and IBC Investors I, LLC (incorporated herein by reference to the Current Report on Form 8-K filed on September 30, 2008).

10.6.1		First Amendment, dated as of December 1, 2008, to the Investment Agreement, dated as of September 26, 2008, between Interstate Bakeries Corporation and IBC Investors I, LLC (incorporated herein by reference to the Current Report on Form 8-K filed on December 5, 2008).

10.7		Equity Contribution Agreement, dated as of September 26, 2008, between Ripplewood Partners II, L.P. and Interstate Bakeries Corporation (incorporated herein by reference to the Current Report on Form 8-K filed on September 30, 2008).

10.8		Amended Joint Plan of Reorganization of Interstate Bakeries Corporation and its Affiliated Debtors and Debtors-in-Possession, dated October 31, 2008 LLC (incorporated herein by reference to the Current Report on Form 8-K filed on December 11, 2008).

31.1		Certification of Craig D. Jung pursuant to Rule 13a-14(a)/15d-14(a)*

31.2		Certification of J. Randall Vance pursuant to Rule 13a-14(a)/15d-14(a)*

32.1		Certification of Craig D. Jung pursuant to 18 U.S.C. Section 1350*

32.2		Certification of J. Randall Vance pursuant to 18 U.S.C. Section 1350*


*		Filed herewith

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: December 24, 2008	By:	/s/ Craig D. Jung

		Craig D. Jung
		Chief Executive Officer
		(Principal Executive Officer)

Dated: December 24, 2008	By:	/s/ J. Randall Vance

		J. Randall Vance
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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