~~Table~~UNITED ofSTATES SECURITIES ~~Contents~~AND EXCHANGE COMMISSION

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

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

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

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

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

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

~~For the quarterly period ended March 10, 2007~~ OR

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

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

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

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

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

(Exact name of registrant as specified in its charter)


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)

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)

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

Indicate by check mark whether the registrant (~~816~~1) ~~502-4000~~has filed all reports required to be filed by Section 13 or 15(~~Registrant’s~~d) ~~telephone~~of ~~number,~~the ~~including~~Securities ~~area~~Exchange ~~code~~Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant ~~(1) has~~is ~~filed~~a ~~all~~large ~~reports~~accelerated ~~required~~filer, toan beaccelerated ~~filed by~~filer ~~Section 13~~ or a ~~15(d)~~non-accelerated offiler. ~~the~~See ~~Securities~~definition ~~Exchange~~of ~~Act~~“accelerated offiler ~~1934~~and ~~during~~large ~~the~~accelerated ~~preceding~~filer” ~~12 months~~in ~~(or~~Rule ~~for~~12b-2 ~~such~~of ~~shorter period that~~ the ~~registrant~~Exchange ~~was~~Act ~~required to file such reports) and~~ (~~2) has~~check ~~been~~one): ~~subject~~ Large toaccelerated ~~such~~filer ~~filing~~o Accelerated ~~requirements~~filer ~~for~~þ Non-accelerated ~~the~~filer ~~past 90 days. Yes~~ o ~~No þ~~

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

~~Large~~There ~~accelerated~~were ~~filer~~45,240,384 oshares ~~Accelerated~~of ~~filer~~common þstock, $0.01 par value per share, outstanding on December ~~Non-accelerated~~10, ~~filer~~2007. oGiving effect to our senior subordinated convertible notes and common stock equivalents, there were 55,138,825 shares of common stock outstanding as of December 10, 2007.

~~Indicate~~INTERSTATE byBAKERIES ~~check~~CORPORATION FORM ~~mark whether the registrant is a shell company (as defined in Rule 12b~~10-~~2 of the~~Q ~~Exchange~~QUARTER ~~Act).~~ENDED ~~Yes~~NOVEMBER o17, ~~No þ~~2007

There were 45,250,816 shares of common stock, $0.01 par value per share, outstanding on April 6, 2007. Giving effect to our senior subordinated convertible notes and common stock equivalents, there were 55,149,257 shares of common stock outstanding as of April 6, 2007.


	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

~~INTERSTATE BAKERIES CORPORATION~~2 ~~FORM 10-Q QUARTER ENDED MARCH 10, 2007~~

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		32
Forward-Looking Statements		40
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		43
ITEM 4. Controls and Procedures		44
PART II — OTHER INFORMATION		45
ITEM 1. Legal Proceedings		45
ITEM 1A. Risk Factors		46
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		47
ITEM 6. Exhibits		48
Signatures		49
302 Certification of Chief Executive Officer
302 Certification of Executive VP and Chief Financial Officer
906 Certification of Chief Executive Officer
906 Certification of Executive VP and Chief Financial Officer

PART I. FINANCIAL INFORMATION

2Item 1. Financial Statements

~~Table~~INTERSTATE ofBAKERIES ~~Contents~~CORPORATION

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

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

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

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

(UNAUDITED)


	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

~~(dollars~~See inaccompanying ~~thousands,~~notes ~~except~~to ~~share~~condensed ~~data)~~consolidated financial statements.

	March 10,			June 3,
	2007			2006
ASSETS
Current assets
Cash	$	70,907		$	78,178
Restricted cash		8,829			86,353
Accounts receivable, less allowance for doubtful accounts of $3,215 and $3,400, respectively		146,553			150,507
Inventories		67,092			65,431
Assets held for sale		10,175			11,931
Other current assets		56,634			67,637
Total current assets		360,190			460,037
Property and equipment, net		559,670			601,101
Intangible assets		160,441			161,128
Other assets		30,399			30,789
Total assets	$	1,110,700		$	1,253,055
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities not subject to compromise
Current liabilities
Long-term debt	$	451,508		$	494,882
Accounts payable		128,440			117,044
Accrued expenses		232,306			244,166
Total current liabilities		812,254			856,092
Other liabilities		269,018			272,647
Deferred income taxes		75,719			77,819
Total liabilities not subject to compromise		1,156,991			1,206,558
Liabilities subject to compromise		288,809			287,080
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, 45,251,000 and 45,295,000 shares outstanding, respectively		816			816
Additional paid-in capital		584,238			585,631
Accumulated deficit		(237,562	)		(142,711	)
Treasury stock, 36,328,000 and 36,284,000 shares at cost, respectively		(678,714	)		(678,572	)
Unearned restricted stock compensation		—			(1,869	)
Accumulated other comprehensive loss		(3,878	)		(3,878	)
Total stockholders’ deficit		(335,100	)		(240,583	)
Total liabilities and stockholders’ deficit	$	1,110,700		$	1,253,055

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

3 (DEBTOR-IN-POSSESSION)

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~STATEMENTS OF OPERATIONS

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

~~CONDENSED~~(dollars ~~CONSOLIDATED~~in ~~STATEMENTS~~thousands, OFexcept ~~OPERATIONS~~per share data)

(UNAUDITED)


	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	)

~~(dollars~~See inaccompanying ~~thousands,~~notes ~~except~~to ~~per~~condensed ~~share~~consolidated ~~data)~~financial statements.

	Sixteen Weeks Ended						Forty Weeks Ended
	March 10,			March 4,			March 10,			March 4,
	2007			2006			2007			2006
Net sales	$	861,641		$	874,809		$	2,217,799		$	2,321,839
Cost of products sold (exclusive of items shown below)		440,215			455,740			1,139,908			1,183,175
Selling, delivery and administrative expenses		417,300			447,546			1,058,672			1,151,793
Restructuring credits		(246	)		(33,332	)		(3,910	)		(21,677	)
Depreciation and amortization		22,015			23,531			54,548			59,082
Loss on sale or abandonment of assets		2,023			1,183			2,757			1,749
		881,307			894,668			2,251,975			2,374,122
Operating loss		(19,666	)		(19,859	)		(34,176	)		(52,283	)
Other (income) expense
Interest expense (excluding unrecorded contractual interest expense of $1,867, $1,867, $4,617, and $4,550, respectively)		14,673			16,529			38,831			39,020
Reorganization charges, net		9,980			10,255			26,687			28,402
Other income		(44	)		(82	)		(1,120	)		(2,917	)
		24,609			26,702			64,398			64,505
Loss before income taxes		(44,275	)		(46,561	)		(98,574	)		(116,788	)
Provision (benefit) for income taxes		(2,040	)		(3,927	)		(3,723	)		(13,842	)
Net loss	$	(42,235	)	$	(42,634	)	$	(94,851	)	$	(102,946	)
Loss per share
Basic	$	(0.94	)	$	(0.94	)	$	(2.10	)	$	(2.28	)
Diluted	$	(0.94	)	$	(0.94	)	$	(2.10	)	$	(2.28	)

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

4 (DEBTOR-IN-POSSESSION)

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~STATEMENTS OF CASH FLOWS

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

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~ (~~UNAUDITED)(~~dollars in thousands)

	Forty Weeks Ended
	Twenty-Four Weeks Ended
	March 10,			March 4,
	November 17,			November 18,
	2007			2006
Operating activities
Net loss	$	(9455,~~851~~154	)	$	(~~102~~52,~~946~~616	)
Depreciation and amortization		5430,~~548~~853			5932,~~082~~533
Provision (benefit) for deferred income taxes		~~900~~(1,725	)		~~(1,260~~600	)
Reorganization charges, net		2618,~~687~~905			2816,~~402~~707
Cash reorganization items		(2714,~~399~~519	)		(2814,~~094~~700	)
Non-cash bankruptcy-related credits		848			(294	)
Non-cash bankruptcy-related charges (credits)		1,964			234
Non-cash interest expense — deferred debt fees		21,~~524~~023			~~5,247~~661
Non-cash restricted stock and deferred share compensation expense		83375			~~641~~449
(Gain) loss on sale, write-down or abandonment of assets		(39,~~349~~559	)		(315,~~217~~375	)
Change in operating assets and liabilities:
Accounts receivable		317,~~954~~295			222,~~402~~477
Inventories		(111,~~661~~869	)		11(1,~~079~~540	)
Other current assets		~~8,003~~(94	)		(12,~~198~~116	)
Accounts payable and accrued expenses		~~623~~(14,351	)		(156,~~096~~992	)
Long-term portion of self insurance reserves		(~~219~~292	)		~~15,049~~(488	)
Other		(~~1,485~~100	)		~~(7,095~~527	)
Net cash from (used in) operating activities		~~(30~~5,~~794~~608	)		(4529,~~298~~639	)
Investing activities
Purchases of property and equipment		(2110,~~135~~155	)		(2511,~~225~~620	)
Proceeds from sale of assets		143,~~445~~771			7913,~~839~~158
Restricted cash deposit		(123,~~503~~862	)		(7411,~~276~~354	)
Restricted cash release		~~89,222~~—			—89,222
Acquisition and development of software assets		(~~1,678~~494	)		—(758	)
Other		~~221~~33			51217
Net cash from (used in) investing activities		68(10,~~572~~707	)		~~(19~~78,~~611~~865	)
Financing activities
Reduction of long-term debt		(~~46,066~~494	)		(~~800~~45,792	)
Increase in revolving credit facility		32,~~051~~421			~~13,415~~—
Stock option exercise proceeds		—			101
Debt fees		(5,600	)		—
Acquisition of treasury stock		—			(1	)
Net cash used in financing activities		(3,673	)		(45,792	)
Debt fees		(2,034	)		(750	)
Net (decrease) increase in cash		(8,772	)		3,434
Net cash from (used in) financing activities		(45,049	)		11,965
Cash at the beginning of period		67,212			78,178
Net increase (decrease) in cash		(7,271	)		(52,944	)
Cash at the end of period	$	58,440		$	81,612
Cash at the beginning of period		78,178			151,558
Cash at the end of period	$	70,907		$	98,614
Cash payments (received)
Interest	$	3519,~~668~~629		$	3520,~~234~~747
Income taxes		~~(13,499~~116	)		(~~15,486~~530	)
Non-cash investing and financing activities
Long-term debt reduction from lease rejections		~~359~~—			~~890~~359
Asset disposals from lease rejections		~~271~~—			~~705~~271
Convertible note conversion to equity		1—			—1
Interest income earned on restricted cash deposit		~~688~~209			~~405~~614

See accompanying notes to condensed consolidated financial statements.

~~Table~~INTERSTATE ofBAKERIES ~~Contents~~CORPORATION

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

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

(dollars and shares in thousands)

	Common																~~Unearned~~Accumulated			~~Accumulated~~
	Stock Issued				Additional						Treasury Stock						~~Restricted~~Other			~~Other~~Total			~~Total~~
	Number		Par		Paid-in			Accumulated			Number of						~~Stock~~Comprehensive			~~Comprehensive~~Stockholders’			~~Stockholders’~~
	of Shares		Value		Capital			Deficit			Shares			Cost			~~Compensation~~Income			~~Loss~~Deficit			~~Deficit~~
Balance June 3, 2006		81,579	$	816	$	585,631		$	(142,711	)		(36,284	)	$	(678,572	)	$	(1,869	)	$	(3,878	)	$	(240,583	)
Balance June 2, 2007		81,579	$	816	$	584,503		$	(255,559	)		(36,330	)	$	(678,721	)	$	30,220		$	(318,741	)
Comprehensive loss		—		—		—			(9455,~~851~~154	)		—			—			—(2,936	)		—(58,090	)		~~(94,851~~	)
Adoption of SFAS No. 123R, Share-Based Payment		—		—		(1,869	)		—			—			—			1,869			—			—
Cumulative effect of change in accounting for uncertainty in income taxes pursuant to FIN No. 48		—		—		—			(3,649	)		—			—			—			(3,649	)
Convertible note conversion		—		—		(1	)		—			—			2			—			—			1
Restricted share compensation expense		—		—		471			—			—			—			—			471
Restricted share compensation expense		—		—		883			—			—			—			—			—			883
Restricted share surrenders		—		—		(80	)		—			(9	)		(16	)		—			(96	)
Restricted share surrenders		—		—		(406	)		—			(44	)		(144	)		—			—			(550	)
Balance November 17, 2007		81,579	$	816	$	584,894		$	(314,362	)		(36,339	)	$	(678,737	)	$	27,284		$	(380,105	)
Balance March 10, 2007		81,579	$	816	$	584,238		$	(237,562	)		(36,328	)	$	(678,714	)	$	—		$	(3,878	)	$	(335,100	)

See accompanying notes to condensed consolidated financial statements.

~~Table~~INTERSTATE ofBAKERIES ~~Contents~~CORPORATION

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Voluntary Chapter 11 Filing

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~~ and 04-45822). On September 24, 2004, the official committee of unsecured creditors was appointed in in our Chapter 11 cases. Subsequently, on November 29, 2004, the official committee of equity ~~security~~ 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 ~~(the DIP Facility)~~ 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, J.P. Morgan Securities Inc., as lead arranger and book runner, and JPMCB, as administrative and collateral agent for the Lenders. The ~~DIP~~Revolving ~~Facility~~Credit ~~received~~Agreement received interim approval by the Bankruptcy Court on September 23, 2004 and final approval on October 22, 2004. The ~~DIP~~Revolving ~~Facility~~ 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 ~~DIP~~Revolving ~~Facility~~Credit onAgreement on November 1, 2004, the second amendment to the ~~DIP~~Revolving ~~Facility~~ Credit Agreement on January 20, 2005, the third amendment to the ~~DIP~~Revolving ~~Facility~~Credit Agreement on May 26, 2005, the fourth amendment to the Revolving ~~DIP~~Credit ~~Facility~~Agreement on November 30, 2005, the fifth amendment to the ~~DIP~~Revolving ~~Facility~~Credit Agreement on December 27, 2005, the sixth amendment to the ~~DIP~~Revolving ~~Facility~~Credit Agreement on March 29, 2006, the seventh amendment to the ~~DIP Facility~~Revolving Credit Agreement on June 28, 2006, the eighth amendment to the ~~DIP~~Revolving ~~Facility~~Credit Agreement on August 25, 2006, ~~and~~ the ninth amendment to the Revolving ~~DIP~~Credit ~~Facility~~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.

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

	•		authorize us to pay pre-petition and post-petition employee wages and salaries and related benefits during our restructuring under Chapter 11;

	•		authorize us to pay trust fund taxes in the ordinary course of business, including pre-petition amounts; and

	•		authorize the continued use of our cash management systems.

~~Pursuant to the Bankruptcy Code, our pre-petition obligations, including obligations under debt~~7 ~~instruments, generally may not be enforced against us. In addition, any actions to collect pre-petition indebtedness are automatically stayed unless the stay is lifted by the Bankruptcy Court.~~

AsPursuant ato ~~debtor-in-possession, we have~~ the ~~right~~Bankruptcy Code, ~~subject~~our topre-petition ~~Bankruptcy~~obligations, ~~Court~~including ~~approval~~obligations ~~and~~under ~~certain~~debt ~~other limitations~~instruments, togenerally ~~assume~~may ornot ~~reject~~been ~~executory~~forced ~~contracts~~against ~~and unexpired leases~~us. In ~~this context~~addition, ~~“assume”~~ ~~means~~any ~~that~~actions ~~we agree~~ to ~~perform our obligations and cure all existing defaults under the~~collect ~~contract~~pre-petition orindebtedness ~~lease, and “reject” means that we~~ are ~~relieved~~automatically ~~from~~stayed ~~our~~unless ~~obligations to perform further under~~ the ~~contract~~stay oris ~~lease~~lifted ~~but~~by ~~are subject to a claim for damages for~~ the Bankruptcy Court.

7As a debtor-in-possession, we have the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject executory contracts and unexpired leases. In this context, “assume” means that we agree to perform our obligations and cure all existing defaults under the contract or lease, and “reject” means that we are relieved from our obligations to perform further under the contract or lease but are subject to a claim for damages for the breach thereof. Any 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. As of December 10, 2007, we have rejected over 500 unexpired leases and have accrued charges for our estimated liability related thereto in the applicable periods. We are in the process of reviewing our executory contracts and remaining unexpired leases to determine which, if any, we will reject. 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.

~~Table~~Since the Petition Date, we have been actively engaged in restructuring our operations. As previously disclosed, we (i) restructured our 10 profit centers (PCs), which are now 8 business units; (ii) rationalized our delivery route network; (iii) reduced our workforce; (iv) disposed of certain ~~Contents~~non-core assets; and (v) commenced negotiations of long-term extensions with respect to most of our collective bargaining agreements (CBAs) with union-represented employees. We also initiated a marketing program designed to offset revenue declines by developing protocols to better anticipate and meet changing consumer demand through a consistent flow of new products.

~~breach~~In ~~thereof.~~February 2007, ~~Any~~we ~~damages~~hired ~~resulting~~a ~~from~~new ~~rejection~~Chief ofExecutive ~~executory~~Officer, ~~contracts~~Craig D. Jung, and ~~unexpired~~began ~~leases~~the next stage ~~will~~of berestructuring ~~treated~~activities, aswhich ~~general~~initially ~~unsecured~~was ~~claims~~focused inon the ~~Chapter 11~~development ~~process~~of ~~unless~~a ~~such~~business ~~claims~~plan ~~had been~~to ~~secured~~use onas a ~~pre-petition~~ basis. Asfor a plan of ~~April 6,~~reorganization. ~~2007,~~In wedeveloping ~~have~~such ~~rejected~~a ~~approximately~~business ~~440~~plan, ~~unexpired~~Mr. Jung ~~leases~~established ~~and~~four ~~have~~operating ~~included~~priorities ~~charges~~ for the Company: (i) profitably grow revenues; (ii) improve productivity; (iii) lower our ~~estimated~~cost ~~liability~~structure; ~~related~~and ~~thereto~~(iv) create ina ~~the~~performance ~~applicable periods~~culture. WeIn ~~are~~order into implement these four priorities, we have determined to undertake the ~~process~~following ofinitiatives, ~~reviewing~~without limitation: ~~our~~(i) implement ~~executory~~a ~~contracts~~distribution ~~and~~system ~~remaining~~with ~~unexpired~~different ~~leases~~delivery options for our customers tobased ~~determine~~on ~~which~~customer size, ifgrowth ~~any,~~potential weand ~~will~~service ~~reject.~~needs ~~For~~to ~~these~~lower ~~executory~~our ~~contracts~~cost structure and profitably ~~remaining~~grow ~~unexpired leases~~the top line, we(ii) implement ~~cannot~~a ~~presently~~lean ~~determine~~manufacturing orprogram ~~reasonably~~to ~~estimate~~drive ~~the~~productivity, (iii) improve ~~ultimate~~brand ~~liability~~management ~~that~~and ~~may~~innovation, ~~result from~~including ~~rejecting~~increased ~~these~~investment ~~contracts~~in ormarketing ~~leases~~our brands, and no(iv) redefine ~~provisions~~our ~~have~~organization ~~yet~~to ~~been~~remove ~~made~~unnecessary ~~for~~layers ~~these~~of ~~items~~management and implement a matrix structure to improve communications, leadership and accountability.

~~Since~~On ~~the~~June 28, ~~Petition Date~~2007, we ~~have~~submitted ~~been~~our ~~actively~~business ~~engaged~~plan into ~~restructuring~~ our ~~operations.~~various ~~With~~constituents ~~the assistance of an independent consulting firm specializing~~ in ~~restructuring~~the ~~operations~~bankruptcy, we ~~restructured~~including ~~our~~representatives 10of ~~profit~~our ~~centers~~lender ~~(PCs),~~syndicates ~~including~~and ~~the~~official ~~closure~~committees of ~~bakeries~~creditors and ~~distribution~~equity ~~centers,~~security ~~rationalized~~holders. ~~our~~In ~~delivery~~order ~~route~~to ~~network,~~secure ~~and~~rational ~~reduced~~financing ~~our~~required ~~workforce.~~to Inimplement ~~addition~~this business plan; however, we ~~disposed~~ ofbelieve ~~certain~~additional ~~non-core~~concessions ~~assets~~from ~~during~~ our ~~Chapter 11~~unionized ~~case~~employees ~~and~~are ~~commenced~~required. ~~negotiations~~In June of ~~long-term~~2007, ~~extensions~~we ~~with~~initiated ~~respect~~talks towith ~~most~~representatives of ~~our~~the ~~approximately~~two ~~420~~labor ~~collective~~organizations, ~~bargaining~~the ~~agreements~~Bakery ~~(CBAs) with union-represented employees. Finally~~Confectionery, weTobacco ~~have~~Workers ~~initiated~~& aGrain ~~marketing~~Millers ~~program~~International ~~designed~~Union ~~to offset revenue declines by developing protocols to better anticipate~~ (BCTGM) and ~~meet changing consumer~~International ~~demand~~Brotherhood ~~through a consistent flow~~ of ~~new~~Teamsters ~~products.~~(IBT), Asrepresenting ~~part~~approximately 90% of our ~~restructuring~~unionized ~~efforts~~employees ~~we are~~to ~~evaluating~~achieve ~~various~~further ~~alternatives~~concessions, including, ~~but~~greater ~~not~~flexibility ~~limited~~in ~~to,~~ the ~~sale~~method ofand ~~some~~manner orby ~~all~~which ofwe distribute our ~~assets,~~ ~~infusion~~products ofto ~~capital,~~our ~~debt~~customers ~~restructuring~~ and ~~the~~cost ~~filing~~reductions ofrelated ato ~~plan~~health ofand ~~reorganization with the~~welfare ~~Bankruptcy Court, or any combination of these options~~programs.

~~When~~No weagreement ~~began~~with the PCIBT ~~review~~has ~~process~~been reached, although we ~~recognized~~remain ~~that~~open ~~such~~to ~~complex~~constructive ~~consolidation activities would~~discussions ~~entail~~with ~~certain~~the ~~implementation risks~~IBT. ~~For~~We ~~example,~~have itreached ~~could~~agreement ~~not be determined~~ with ~~precision~~the ~~that forecasted~~BCTGM, ~~sales~~which ~~would~~has bebeen ~~achieved~~ratified inby ~~terms~~approximately 98% of ~~either~~its ~~sales~~local ~~volume~~bargaining ~~or gross margin~~units. We ~~anticipated that~~have ~~there~~also ~~would~~reached beagreements awith ~~period of transition before~~ the ~~true~~majority ~~impact~~ of the ~~projected efficiencies~~other ~~could~~unions berepresenting ~~realized.~~our ~~Indeed, we expected that the path would not always be smooth as both~~ employees ~~and customers had to become accustomed to the restructured operations. Accordingly~~, wewhich have been ~~and~~ ~~will~~ratified ~~continue to evaluate the impact of these restructurings. For instance, we continue to~~by ~~focus~~approximately on12% ~~improving manufacturing processes in the bakeries and enhancing service to customers through our field sales force. Understanding the true impact~~ of ~~the~~their ~~projected efficiencies is a~~local ~~critical~~bargaining ~~component in evaluating the credibility of a long-term business plan~~units. ~~A credible long-term~~ business plan is essential to the assessment of a reasonable range of values for our reorganized business and the determination of how much debt and equity our businesses will be able to support. Both of these assessments are prerequisites to discussions regarding the filing of a plan of reorganization.

~~See~~In ~~Note~~early 14October 2007, we embarked on the process of formulating a rational strategy for maximizing value of the bankruptcy estates. ~~Restructuring~~We ~~(Credits)~~continue ~~Charges~~to face substantial uncertainty with respect to ~~these~~the outcome ~~condensed~~of ~~consolidated~~our ~~financial~~efforts ~~statements~~to maximize value of the bankruptcy estates, and there can be no assurance ~~for~~as ~~related~~to ~~disclosures~~whether we will be able to successfully implement any such strategy, which may 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.

~~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 the circumstances leading to the bankruptcy 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 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.

~~The~~After ~~condensed~~receiving ~~consolidated~~Bankruptcy ~~financial~~Court ~~statements~~approval, ~~reflect~~we ~~adjustments~~entered ininto ~~accordance~~exit financing agreements with ~~American~~Silver ~~Institute~~Point ofFinance ~~Certified~~L.L.C. ~~Public~~and ~~Accountants’~~its ~~Statement~~affiliated ofinvestment ~~Position~~funds ~~90-7,~~and ~~Financial~~plan ~~Reporting~~funding byagreements with holders ~~Entities~~of inapproximately ~~Reorganization~~95% ~~Under~~of the ~~Bankruptcy~~funded ~~Code~~amounts ~~(SOP~~outstanding ~~90-7),~~under ~~which~~our ~~was~~pre-petition ~~adopted~~senior ~~for~~secured ~~financial~~credit ~~reporting~~facility. inThis ~~periods~~financing ~~ending~~is ~~after~~contingent ~~September 22~~upon, ~~2004,~~among ~~assuming~~other ~~that~~things, weus ~~will~~reaching ~~continue~~agreement ason, ~~a going~~and ~~concern.~~achieving Inratification of, the ~~Chapter 11~~changes ~~proceedings,~~to ~~substantially~~our ~~all~~collective ~~unsecured~~bargaining ~~liabilities~~agreements ~~except~~with ~~payroll~~our ~~and~~major ~~benefit~~unions ~~related~~necessary ~~charges~~to asimplement ofour ~~the~~business ~~Petition~~plan, ~~Date~~which ~~are~~to ~~subject~~date towe ~~compromise~~have ornot ~~other~~achieved. ~~treatment~~On ~~under~~November 5, 2007, we filed a ~~plan~~Plan of ~~reorganization~~Reorganization ~~which~~and ~~must~~related beDisclosure ~~confirmed~~Statement bywith the Bankruptcy Court ~~after~~based ~~submission~~upon tothe ~~any required~~exit ~~vote~~financing commitment by ~~affected~~Silver ~~parties.~~Point ~~For~~Finance ~~financial~~L.L.C. ~~reporting~~and ~~purposes,~~plan ~~those liabilities and~~funding ~~obligations~~agreements. ~~whose~~Our ~~treatment~~exclusive ~~and~~period ~~satisfaction~~within iswhich ~~dependent~~to onfile ~~the~~a ~~outcome~~plan of ~~the~~reorganization ~~Chapter 11~~expired on ~~proceedings~~November 8, ~~are~~2007. ~~segregated~~Our ~~and~~exclusive ~~classified~~period aswithin ~~Liabilities~~which ~~Subject~~ to ~~Compromise~~solicit inacceptances ~~the~~of ~~consolidated balance~~our ~~sheet~~plan ~~under~~of reorganization ~~SOP~~expires ~~90-~~on January 7., ~~The ultimate amount of and~~2008.

8We have established bidding procedures, which have been approved by the Bankruptcy Court, to govern the process for soliciting alternative investment proposals. Under the procedures, indications of interest were due by November 28, 2007 with final proposals due on January 15, 2008. If multiple viable 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.

~~Table~~See ofNote ~~Contents~~13. Restructuring Charges (Credits) to these condensed consolidated financial statements for related or additional disclosures.

~~settlement~~Our ~~terms~~financial ~~for~~statements ~~our~~are ~~pre~~prepared on a going-~~bankruptcy~~concern ~~liabilities~~basis, ~~are~~which ~~dependent~~contemplates onthe realization of assets and the ~~outcome~~satisfaction of liabilities in the normal course of business. However, because of the Chapter 11 ~~proceedings~~ filing process and our recurring losses from operations, ~~accordingly~~negative working capital, downward ~~are~~sales ~~not~~trends, ~~presently~~and ~~determinable.~~the ~~Pursuant~~potential tolack ~~SOP~~of ~~90-7,~~liquidity ~~professional fees~~should ~~associated~~we ~~with~~be ~~the~~unable to successfully reorganize under Chapter 11, ~~proceedings~~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 ~~certain~~execute ~~gains~~various alternatives including the sale of some or all of our assets, infusion of capital, debt restructuring and ~~losses~~the ~~resulting~~development, ~~from~~confirmation and implementation of a plan of reorganization, our ability to comply with the terms of the DIP Facility, our ~~business~~ability ~~are~~to negotiate ~~reported~~an ~~separately~~extension asof ~~reorganization~~or ~~items.~~refinance Inour ~~addition~~DIP Facility at its maturity, our ability to implement ~~interest~~our ~~expense~~restructuring isactivities, ~~reported~~our ~~only~~ability to ~~the~~obtain ~~extent~~concessions ~~that~~from itour ~~will~~labor beunions, ~~paid~~our ~~during~~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 ~~Chapter 11~~event our ~~proceedings~~restructuring oractivities ~~that~~are itnot issuccessful ~~probable~~and ~~that~~we itare required to liquidate, additional significant adjustments will be annecessary ~~allowed~~in ~~claim~~the ~~under~~carrying ~~the~~value ~~bankruptcy~~of assets and liabilities, the ~~proceedings~~revenues and expenses reported and the balance sheet classifications used.

2The 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. ~~Description~~In the Chapter 11 proceedings, substantially all unsecured liabilities except payroll and benefit related charges as of ~~Business~~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 ~~Significant~~whose ~~Accounting~~treatment ~~Policies~~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.

~~Description of Business~~9

~~Interstate Bakeries Corporation is one of the largest wholesale bakers and distributors of fresh bakery products in the United States~~2. ~~The~~Description accompanying unaudited condensed consolidated financial statements, included herein, have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of ~~Regulation S-X.~~Business ~~Accordingly, they do not include all of the information~~ and ~~footnotes required~~Significant byAccounting ~~U.S. generally accepted accounting principles for complete financial statements. In the~~Policies opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the sixteen and forty weeks ended March 10, 2007 may not necessarily be indicative of the results for the full year ending June 2, 2007.

~~The~~Description ~~consolidated balance sheet presented at June 3, 2006 has been derived from the audited financial statements at that date, but does not include all~~ of ~~the information and footnotes~~Business 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 3, 2006.

~~Unless~~Interstate Bakeries Corporation is one of the ~~context~~largest ~~indicates~~wholesale ~~otherwise,~~bakers ~~“IBC,”~~and ~~“us~~distributors of fresh bakery products in the United States. The accompanying unaudited condensed consolidated financial statements,” ~~“we~~included herein,” have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and ~~“our”~~with ~~refers~~the instructions to ~~Interstate~~Form ~~Bakeries~~10-Q and ~~Corporation~~Article 10 of Regulation S-X. Accordingly, they do not include all of the information and ~~its~~footnotes required ~~subsidiaries~~by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, ~~taken~~all asadjustments (consisting of normal recurring accruals) considered necessary for a ~~whole~~fair presentation have been included. Operating results for the twelve and twenty-four weeks ended November 17, 2007 may not necessarily be indicative of the results for the full year ending May 31, 2008.

~~Significant~~The ~~Accounting~~consolidated ~~Policies~~balance sheet presented at June 2, 2007 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 2, 2007.

~~For~~Unless ~~further~~the ~~information,~~context ~~refer~~indicates tootherwise, ~~Significant~~“IBC,” ~~Accounting~~“us,” ~~Policies~~“we,” inand “our” ~~Annual~~refers ~~Report~~to onInterstate ~~Form 10-K~~Bakeries ~~for~~Corporation ~~the~~and ~~year~~its ~~ended June 3~~subsidiaries, ~~2006~~taken as a whole.

~~Fiscal~~Significant ~~year~~Accounting ~~end — Our fiscal year is a 52 or 53-week period ending on the Saturday closest to the~~Policies ~~last day of May.~~

~~Principles~~For offurther ~~consolidation~~information, —refer ~~The~~to ~~condensed~~Significant ~~consolidated~~Accounting ~~financial~~Policies ~~statements~~in ~~include~~our ~~the~~Annual ~~accounts of~~Report ~~IBC~~on ~~and~~Form ~~its~~10-K for ~~subsidiaries.~~the ~~All~~year ~~significant~~ended ~~intercompany~~June 2, ~~accounts and transactions have been eliminated~~2007.

~~Use~~Fiscal ofYear ~~estimates — The preparation of the condensed consolidated financial statements in conformity~~End 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~~Our ~~and~~fiscal ~~cash~~year ~~equivalents~~is —a We52 ~~consider all highly liquid investments purchased with an original maturity of three months~~ or ~~less~~53-week toperiod beending ~~cash~~on ~~equivalents.~~the ~~Additionally,~~Saturday ~~included~~closest in accounts payable are checks written in excess of recorded balances totaling approximately $37.6 million and $26.7 million at March 10, 2007 and June 3, 2006, 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~~last ~~statement~~day of ~~cash flows~~May. ~~See Note 8. Debt to these condensed~~ ~~consolidated financial statements for related disclosures.~~

~~Contingencies~~Principles — Various lawsuits, claims and proceedings are pending against us. In accordance with 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~~Consolidation ~~Note 17. Commitments and Contingencies to these condensed consolidated financial statements for related disclosures.~~

~~Newly~~The ~~Adopted~~condensed ~~Accounting~~consolidated ~~Pronouncements~~financial —statements Ininclude ~~May 2005,~~ the ~~Financial~~accounts ~~Accounting~~of ~~Standards~~IBC ~~Board~~and its subsidiaries. ~~(FASB)~~All significant intercompany accounts and transactions have been eliminated.

9Use of Estimates

~~Table~~The preparation of ~~Contents~~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.

~~issued~~Cash ~~Statement of Financial Accounting Standards (SFAS) No. 154, Accounting Changes~~ and ~~Error Corrections~~Cash ~~(SFAS 154), which replaces Accounting Principles Board Opinion (APB Opinion) No. 20,~~equivalents Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting and reporting of a change in accounting principle. SFAS 154 requires that, when a company changes its accounting policies, it must apply the change retrospectively to all periods presented instead of a cumulative effect adjustment in the period of the change. SFAS 154 may also apply when the FASB issues new rules requiring changes in accounting. However, if the new rule allows cumulative effect treatment, it would take precedence over SFAS 154. This statement is effective for accounting changes and error corrections made in fiscal years beginning after December 15, 2005. SFAS 154 was effective for us in the first quarter of fiscal 2007. The implementation of SFAS 154 did not have a significant impact on our consolidated results of operations, cash flows, and financial position.

InWe ~~December 2004,~~consider ~~the~~all ~~FASB~~highly ~~issued~~liquid ~~SFAS~~investments ~~No. 123R~~purchased ~~(Revised~~with ~~2004),~~an ~~Share-Based~~original ~~Payment~~maturity ~~(SFAS~~of ~~123R),~~three months or ~~which~~less ~~amended~~to ~~SFAS~~be Nocash equivalents. ~~123~~ Additionally, ~~Accounting~~included ~~for~~in ~~Stock-Based~~accounts ~~Compensation,~~payable ~~(SFAS~~are ~~123)~~checks ~~and~~written ~~superseded~~in ~~Accounting~~excess ~~Principles~~of ~~Board~~recorded ~~Opinion~~balances ~~(APB~~totaling ~~Opinion)~~approximately No$27.3 ~~25,~~million ~~Accounting~~and ~~for Stock Issued to Employees (APB Opinion 25)~~$32.9 million Inat ~~April~~November ~~2005~~17, 2007 ~~the Securities~~ and ~~Exchange~~June 2, ~~Commission delayed the implementation of SFAS 123R~~2007, ~~which~~respectively. ~~became~~Restricted ~~effective~~cash ~~for~~represents ~~public~~cash ~~companies~~held as ofcollateral ~~the first interim or annual~~pursuant ~~reporting~~to ~~period~~our ofdebtor-in-possession ~~the~~financing ~~registrant’s~~agreement ~~first~~and ~~fiscal~~is ~~year~~not ~~that~~considered ~~began~~a ~~after~~cash ~~June 15,~~equivalent ~~2005.~~in ~~Under~~ the ~~new~~consolidated ~~rule,~~statement ~~SFAS 123R became effective for us in the first quarter~~ of ~~fiscal~~cash ~~2007~~flows. See Note 138. ~~Stock-Based~~ ~~Compensation~~Debt to these condensed consolidated financial statements for related disclosures.

~~In November 2004, the FASB issued SFAS No. 151, Inventory Costs – An Amendment of ARB No. 43,~~Contingencies Chapter 4 (SFAS 151). SFAS 151 is effective for fiscal years beginning after June 15, 2005, and was effective for us in the first quarter of fiscal 2007. SFAS 151 amends the existing guidance on the recognition of inventory costs to clarify the accounting for abnormal amounts of idle expense, freight, handling costs, and wasted material (spoilage). Existing rules indicate that under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be “so abnormal” as to require treatment as current period charges. SFAS 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of “so abnormal.” In addition, SFAS 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The implementation of SFAS 151 did not have a significant impact on our consolidated results of operations, cash flows, and financial position.

~~Recently~~Various ~~Issued~~lawsuits, ~~Accounting~~claims ~~Pronouncements~~and —proceedings Inare ~~February 2007,~~pending ~~the~~against ~~FASB issued SFAS No~~us. ~~159,~~ ~~The Fair~~In ~~Value~~accordance ~~Option~~with ~~for~~Statement of Financial ~~Assets~~Accounting ~~and~~Standards ~~Liabilities~~ (SFAS ~~159~~) No. ~~SFAS 159 is effective as of the beginning of the first fiscal year beginning after November~~ 155, ~~2007,~~Accounting ~~and is effective~~ for usContingencies, ~~at the~~we ~~beginning~~record ofaccruals ~~fiscal 2009. SFAS 159 provides companies with an option to report selected~~for ~~financial~~such ~~assets~~contingencies ~~and~~when ~~liabilities~~it atis ~~fair~~probable ~~value~~ that ~~are~~a ~~not~~liability ~~currently~~will ~~required to~~ be ~~measured~~incurred ~~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~~amount toof ~~mitigate~~loss ~~volatility in reported earnings~~can ~~caused~~be byreasonably ~~measuring~~estimated. ~~related~~See ~~assets~~Note ~~and liabilities differently~~16. ~~SFAS~~Commitments ~~159 also establishes presentation~~ and ~~disclosure~~Contingencies ~~requirements designed~~ to ~~facilitate~~these ~~comparisons~~condensed ~~between companies that~~consolidated ~~choose~~financial ~~different~~statements ~~measurement attributes~~ for ~~similar~~related ~~types of assets and liabilities~~disclosures. ~~We are~~ ~~currently in the process of evaluating the effects of the adoption of SFAS 159 on our consolidated results of operations, cash flows, and financial position.~~

~~In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension~~10 and Other Postretirement Plans (SFAS 158). SFAS 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. SFAS 158 requires prospective application, and the recognition and disclosure requirements are effective for the end of fiscal years ending after December 15, 2006, which will be effective for us in the fourth quarter of fiscal 2007. Additionally, SFAS 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. This requirement is effective for fiscal years ending after December 15, 2008 and will be effective for us in the fourth quarter of fiscal 2009. We are currently in the process of evaluating the effects of the adoption of SFAS 158 on our consolidated results of operations, cash flows, and financial position.

InNewly ~~September 2006,~~Adopted ~~the~~Accounting ~~FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157~~Pronouncements ~~defines fair~~

10In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the way that companies account for uncertainty in income taxes by prescribing a consistent recognition threshold and measurement attribute, as well as establishing criteria for subsequently recognizing, derecognizing, and measuring such tax positions for financial statement purposes. The interpretation also requires expanded disclosure with respect to uncertain income tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006, and was effective for us in the first quarter of fiscal 2008. See Note 15. Income Taxes to these condensed consolidated financial statements for related disclosures.

~~Table~~Recently ofIssued ~~Contents~~Accounting Pronouncements

~~value~~In December 2007, ~~establishes~~the aFASB ~~framework~~issued ~~for~~SFAS ~~using~~No. 160, ~~fair~~Noncontrolling ~~value~~Interests toin ~~measure~~Consolidated ~~assets~~Financial Statements ~~and~~– ~~liabilities,~~an ~~and~~amendment ~~expands disclosures~~of ~~about~~ARB ~~fair~~No.51 ~~value~~(SFAS ~~measurements~~160). ~~This~~SFAS ~~statement~~160 ~~applies~~requires ~~whenever~~all ~~other~~entities ~~statements~~to report ~~require~~noncontrolling orinterest ~~permit~~in ~~assets~~subsidiaries oras ~~liabilities~~equity toin bethe ~~measured~~consolidated atfinancial ~~fair value~~statements. Additionally, SFAS ~~157~~160 isrequires ~~effective~~that ~~for fiscal~~all ~~years~~accounting ~~beginning~~transactions ~~after~~between ~~November 15,~~an ~~2007~~entity and noncontrolling ~~will~~interests to be ~~effective~~treated ~~for~~as usequity intransactions. ~~the~~SFAS ~~first~~160 ~~quarter~~is effective as of the ~~fiscal~~beginning ~~2009.~~of Wethe ~~are~~first ~~currently~~fiscal inyear ~~the~~beginning ~~process~~on ofor ~~evaluating~~after ~~the~~December 15, ~~effects~~2008, ofand ~~the~~is ~~adoption~~effective offor ~~SFAS 157~~us onat ~~our~~the ~~consolidated~~beginning ~~results~~ of ~~operations,~~fiscal ~~cash~~2010. ~~flows,~~Earlier ~~and~~adoption ~~financial~~is ~~position~~prohibited.

In ~~September~~December ~~2006~~2007, the ~~Securities~~FASB ~~and Exchange Commission (SEC)~~ issued ~~Staff~~SFAS ~~Accounting Bulletin (SAB)~~ No. ~~108~~141R, ~~Quantifying~~Business ~~Financial~~Combinations ~~Misstatements~~ (~~SAB~~SFAS ~~108~~141R), which ~~expresses~~revised SFAS ~~the~~141. ~~Staff’s~~SFAS ~~views regarding~~141R requires the ~~process~~acquiring ofentity ~~quantifying~~in ~~financial~~a ~~statement~~business ~~misstatements.~~combination ~~Registrants~~to ~~are~~recognize ~~required~~all the toassets ~~quantify~~acquired ~~the~~and ~~impact~~liabilities ofassumed ~~correcting~~in ~~all~~the ~~misstatements,~~transaction ~~including~~and ~~both~~any ~~the~~noncontrolling ~~carryover~~interest ~~and~~in ~~reversing~~the ~~effects~~acquiree; ofestablishes ~~prior~~the ~~year~~acquisition-date ~~misstatements,~~fair onvalue as the ~~current~~measurement ~~year~~objective ~~financial~~for ~~statements.~~all ~~The financial~~assets ~~statements~~acquired ~~would~~and ~~require~~liabilities ~~adjustment~~assumed; ~~when~~requires ~~either~~the ~~approach~~acquirer ~~results~~to indisclose ~~quantifying~~all ainformation ~~misstatement~~needed ~~that~~to isevaluate ~~material,~~and ~~after~~understand ~~considering~~the ~~all~~nature ~~relevant~~and ~~quantitative~~financial ~~and~~effect ~~qualitative~~of ~~factors.~~the ~~SAB~~business ~~108~~combination; isand requires ~~effective~~the ~~for~~acquirer ~~financial~~to ~~statements~~expense ~~covering~~acquisition-related costs in the ~~first~~periods ~~fiscal~~in ~~year~~which ~~ending~~the ~~after~~costs ~~November 15,~~are ~~2006~~incurred and ~~will~~the beservices ~~effective~~are ~~for~~received usexcept infor the ~~fourth~~costs ~~quarter~~to ofissue ~~fiscal~~debt ~~2007.~~or Weequity ~~are~~securities. ~~currently~~SFAS in141R is ~~the~~effective ~~process~~ as of ~~evaluating~~ the ~~effects~~beginning of the ~~adoption~~first offiscal ~~SAB~~year ~~108~~beginning on ~~our~~or ~~consolidated~~after ~~results~~December 15, ~~of operations~~2008, ~~cash~~and ~~flows,~~is ~~and~~effective ~~financial~~for ~~position~~us at the beginning of fiscal 2010. Earlier adoption is prohibited.

In ~~July~~February ~~2006~~2007, the FASB issued ~~FASB~~SFAS ~~Interpretation (FIN)~~ No. 48159, ~~Accounting~~The ~~for~~Fair ~~Uncertainty~~Value ~~in Income~~Option ~~Taxes~~for —Financial anAssets ~~interpretation~~and Liabilities ~~of FASB Statement No. 109~~ (~~FIN~~SFAS 48159). ~~FIN~~SFAS 48159 is effective ~~for fiscal~~as ~~years~~of the beginning of the first fiscal year beginning after ~~December~~November 15, ~~2006~~2007, and is effective for us inat the ~~first~~beginning ~~quarter~~ of fiscal ~~2008~~2009. ~~FIN~~SFAS 159 48provides ~~clarifies~~companies ~~the~~with ~~way~~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 ~~account~~would then ~~for~~be ~~uncertainty~~required to report unrealized gains and losses on these items in ~~income~~earnings ~~taxes~~at byeach ~~prescribing~~subsequent areporting ~~consistent~~date. ~~recognition~~The ~~threshold~~objective ~~and~~is ~~measurement~~to ~~attribute,~~improve asfinancial ~~well~~reporting asby ~~establishing~~providing companies ~~criteria~~with ~~for~~the ~~subsequently~~opportunity ~~recognizing,~~to ~~derecognizing,~~mitigate ~~and~~volatility ~~measuring~~in ~~such~~reported ~~tax~~earnings ~~positions~~caused ~~for~~by measuring related assets ~~financial~~and ~~statement~~liabilities ~~purposes~~differently. ~~The~~SFAS ~~interpretation~~159 also ~~requires~~establishes ~~expanded~~presentation and disclosure ~~with~~requirements designed ~~respect~~ to facilitate comparisons between companies that choose different measurement attributes ~~uncertain~~for ~~income~~similar ~~tax~~types ~~positions~~of assets and liabilities. We are currently in the process of evaluating the effects of ~~FIN 48~~the adoption of SFAS 159 on our consolidated results of operations, cash flows, and financial position.

In ~~March~~September 2006, the ~~Emerging~~FASB ~~Issues Task Force (EITF)~~ issued ~~EITF~~SFAS ~~Issue~~ No. ~~06-3~~158, ~~How~~Employers’ ~~Taxes Collected~~Accounting ~~from~~for ~~Customers~~Defined ~~and~~Benefit ~~Remitted to Governmental Authorities Should Be Presented in the~~Pension ~~Income~~and ~~Statement~~Other ~~(That~~Postretirement ~~Is,~~Plans ~~Gross versus Net Presentation)~~ (~~EITF~~SFAS ~~06-3~~158). AWe ~~consensus~~adopted ~~was~~the ~~reached that~~recognition ~~entities~~and ~~may~~disclosure ~~adopt a policy~~ requirements of ~~presenting~~SFAS ~~sales~~158 ~~taxes~~ in the ~~income~~fourth ~~statement~~quarter onof ~~either~~fiscal ~~a gross or net basis~~2007. IfAdditionally, ~~taxes~~SFAS ~~are~~158 ~~significant,~~requires ancompanies ~~entity~~to measure ~~should~~plan ~~disclose~~assets ~~its~~and ~~policy~~obligations ofat ~~presenting taxes~~their ~~and~~fiscal ~~the~~year-end ~~tax~~balance ~~amounts~~sheet date. ~~The~~This ~~guidance~~ requirement is effective for ~~interim~~fiscal ~~and~~years ~~annual~~ending ~~reporting periods beginning~~ after December 15, ~~2006,~~2008 ~~which~~and will be effective for us in the fourth quarter of fiscal ~~2007~~ 2009. We ~~present~~are ~~retail~~currently ~~sales~~in ~~net~~the process of ~~sales~~evaluating ~~taxes~~the ~~collected.~~effects ~~This~~of ~~issue~~the measurement ~~will~~date ~~not~~provision ~~impact~~of ~~the~~SFAS ~~method for~~158 ~~recording~~on ~~these~~our ~~sales~~consolidated ~~taxes~~results inof ~~our~~operations, ~~consolidated~~cash flows and financial ~~statements~~position.

3In September 2006, the FASB issued SFAS No. 157, ~~Inventories~~Fair Value Measurements (SFAS 157). SFAS 157 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.

~~The components of inventories are as follows:~~11

	March 10,		June 3,
	2007		2006
	(dollars in thousands)
Ingredients and packaging	$	44,155	$	44,540
Finished goods		22,937		20,891
	$	67,092	$	65,431

3. Inventories

11The components of inventories are as follows:


	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

4. Property and Equipment

Property and equipment consists of the following:

	March 10,			June 3,
	November 17,			June 2,
	2007			~~2006~~2007
	(dollars in thousands)
Land and buildings (lives ranging from 10 to 35 years)	$	389,~~895~~917		$	390,~~573~~147
Machinery and equipment (lives ranging from 4 to 15 years)		~~911~~845,~~261~~481			~~931~~865,~~408~~398
		1,301,156			1,321,981
		1,235,398			1,255,545
Less accumulated depreciation		(~~741~~723,~~486~~945	)		(~~720~~713,~~880~~820	)
	$	~~559~~511,~~670~~453		$	~~601~~541,~~101~~725

~~Included~~On October 20, 2007, we exited the bread market in ~~depreciation~~Southern California. This action entailed the closure of four bakeries and ~~amortization~~the ~~expense~~consolidation isof ~~approximately~~routes ~~$16~~and distribution centers.8 At August ~~million~~25, 2007, based upon our intention to pursue this plan of action and ~~$18.3~~our expectation of the disposal of ~~million~~the ~~for~~related assets, we tested the ~~sixteen~~related ~~week~~long-lived ~~and~~assets $for ~~41.4 million~~recoverability using a probability-weighted approach for continued use or disposal of certain assets and recorded an impairment of approximately $4510.92 million ~~for~~in the ~~forty~~first ~~week~~quarter ~~periods~~of ~~ended~~fiscal 2008. During the second ~~March 10,~~quarter ~~2007~~of ~~and~~fiscal ~~March 4~~2008, ~~2006,~~final ~~respectively,~~determination ~~that~~was ~~relates~~made toconcerning ~~property~~the ~~and~~continued ~~equipment~~use ~~used~~or disposal of certain assets which resulted in ~~our~~a net valuation credit adjustment of approximately $0.4 million to ~~production~~the ~~process~~initial impairment charge.

5The net book value of the total assets related to the Southern California restructuring activities, including those adjusted for impairment, aggregates approximately $18.4 million. ~~Assets~~These ~~Held~~assets have not been classified as held for ~~Sale~~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.

AsIncluded part of our efforts to address our revenue declines and high cost structure, we are continuing a restructuring process for the consolidation and standardization of our distribution system, delivery routes and bakery outlets throughout the nation. This process also includes a review of productive capacity in ~~our~~depreciation ~~bakeries~~ and ~~where~~amortization ~~logical,~~expense weis ~~are closing bakeries and consolidating production. During the third quarter of fiscal 2007, excess assets amounting to~~ approximately $211.9 4 million ~~were identified~~ and ~~reclassified to assets held for sale with net assets of approximately~~ $1012.21 million ~~remaining at March 10, 2007 when combined with assets previously identified as held~~ for ~~sale. Net gains realized on~~ the ~~sale~~twelve ofweek ~~our assets in the third quarter of fiscal 2007~~ and ~~2006~~ ~~aggregated approximately~~ $023.12 million and $3924.86 million ~~while~~for ~~year~~the twenty-~~to-date~~four ~~net~~week ~~gains~~periods ~~for~~ended ~~fiscal~~November 17, 2007 and ~~2006 were approximately $6.6~~November ~~million~~18, ~~and $52.2 million~~2006, respectively~~. Substantially~~, ~~all~~that ofrelates ~~the net gains realized relate~~ to ~~restructuring~~property ~~activities~~ and ~~are~~equipment ~~classified~~used asin ~~long-lived asset credits to~~ our ~~restructuring~~production ~~charges~~process. ~~See Note 14. Restructuring (Credits)~~ ~~Charges.~~

65. ~~Lease~~Assets ~~Obligations~~Held for Sale

InWe ~~the~~have ~~normal~~classified ~~course~~certain oflong-lived ~~business,~~assets weas ~~enter~~held ~~into~~for ~~leases~~sale ~~for~~in ~~office,~~the ~~transportation~~consolidated ~~and~~balance ~~delivery~~sheets in ~~equipment~~accordance aswith ~~well~~the asguidance ~~real~~in ~~estate~~SFAS ~~leases~~144. ~~used~~Assets classified as held for ~~both~~sale are part of our ongoing ~~retail~~effort ~~outlets~~to ~~and~~address asrevenue ~~depots~~declines, cost structure and ~~warehouses~~ productive capacity in our ~~distribution system~~physical facilities. ~~The~~In ~~majority~~the second quarter of ~~the~~fiscal ~~operating~~2008, ~~leases~~approximately ~~contain~~$0.8 million ~~renewal options~~of ~~for~~these ~~varying~~assets ~~periods~~were sold. ~~Certain~~In ~~leases~~addition, ~~provide~~two usexcess ~~with~~properties anvalued ~~option~~at toapproximately ~~acquire~~$0.4 million ~~the~~were ~~related~~identified and ~~equipment~~reclassified atto aassets ~~fair~~held ~~market~~for ~~value~~sale. ~~during~~At orNovember 17, at2007, the ~~end~~total assets held for sale were approximately $0.6 million, all of which are expected to be sold within the ~~lease~~next ~~term~~12 months.

~~At March 10, 2007, we had in place various operating leases for equipment on which at the end of~~12 the lease term we had guaranteed a buyout price, or residual value. On the effective date of FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others, we were required to disclose the undiscounted maximum potential liability of all guaranteed lease residual values and to record a liability for the fair value of such guarantees. At March 10, 2007, the maximum potential liability for all guaranteed lease residual values was $5.8 million, including amounts guaranteed prior and subsequent to the effective date of $2.4 million and $3.4 million, respectively. At March 10, 2007, we had an unamortized liability for the fair value of all guaranteed lease residual values that were entered into or modified subsequent to the effective date of $0.1 million.

12Net 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.

~~Table~~6. ofLease ~~Contents~~Obligations

7In 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. ~~Intangible~~The ~~Assets~~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.

InAt November 17, 2007, we had in place various operating leases for equipment on which at the ~~third~~end ~~quarter~~of the lease term we had guaranteed a buyout price, or residual value. On the effective date of ~~fiscal~~FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others, we were required to disclose the undiscounted maximum potential liability of all guaranteed lease residual values and to record a liability for the fair value of such guarantees. At November 17, 2007, ~~our~~the ~~annual~~maximum ~~impairment~~potential ~~testing~~liability for all guaranteed lease residual values was approximately $3.6 million, including amounts guaranteed prior and subsequent to the effective date of ~~our~~approximately ~~intangible~~$0.2 million ~~assets~~and $3.4 million, respectively. At ~~indicated~~November 17, ~~that~~2007, nowe ~~reduction~~had inan ~~our~~unamortized ~~carrying~~liability for the fair value ~~was~~of ~~required~~all guaranteed lease residual values that were entered into or modified subsequent to the effective date of approximately $0.1 million.

7. Intangible ~~assets consist of the following:~~Assets

	March 10,			June 3,
	2007			2006
	(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		(10,884	)		(10,197	)
Net carrying amount	$	2,970		$	3,657

Intangible assets consist of the following:

Intangible amortization expense for the third quarter of both fiscal 2007 and 2006 was approximately $0.3 million while year-to-date for both fiscal 2007 and 2006 intangible amortization expense was approximately $0.7 million. These amounts were primarily recorded as a reduction of net sales.


	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

8Intangible amortization expense for the second quarter of both fiscal 2008 and 2007 was approximately $0.2 million ~~Debt~~while year-to-date for both 2008 and 2007 intangible amortization expense was approximately $0.4 million. These amounts were primarily recorded as a reduction of net sales.

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

	March 10,			June 3,
	2007			2006
	(dollars in thousands)
Secured
Post-petition credit agreement	$	—		$	—
Senior secured credit facility — pre-petition		447,510			489,817
Unsecured
6% senior subordinated convertible notes — pre-petition		99,999			100,000
Capital lease converted to pre-petition debt		6,125			6,125
Capital leases
Real Estate		3,998			5,065
		557,632			601,007
Less:
Long-term debt recorded to current liabilities		(451,508	)		(494,882	)
Pre-petition debt included in liabilities subject to compromise		(106,124	)		(106,125	)
Long-term debt recorded as long-term liability	$	—		$	—

~~Post-Petition~~8. ~~Credit Agreement~~Debt

~~On September 23, 2004, we entered into a debtor~~Long-~~in-possession~~term ~~Revolving~~debt ~~Credit~~consists ~~Agreement (the DIP Facility) which provides for a $200.0 million commitment (the 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 to February 9, 2008 pursuant to the ~~ninth~~following:


	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	$	—		$	—

~~Table~~Post-Petition ofCredit ~~Contents~~Agreement

On 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 ofup to $150.0 million (increased from the original limitation of $75.0 million as a result of prior amendments) of which $~~109~~122.1 million was utilized at ~~March~~November 1017, 2007. These letters of credit were partially collateralized by approximately $819.82 million of restricted cash at ~~March~~ November 1017, 2007, as required by the DIP Facility. We pay fees ~~approximating~~of 3.0% on the balance of all letters of credit ~~issued and~~ 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 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 ~~March~~ November 1017, 2007, there were no borrowings outstanding under the DIP Facility and we had $9051.9 8 million available under the DIP Facility (of which up to $4027.9 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~~ financial statements, cash flow forecasts, operating budgets and a strategic business plan at ~~specified~~ specified intervals and cumulative minimum EBITDA covenants. Furthermore, we are subject to ~~certain~~ certain limitations on the payment of indebtedness, entering into investments, the payment of ~~capital~~ 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 ~~debt~~the ~~secured~~debt byon 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 ~~March~~November 1017, 2007, we were in compliance with all financial covenants, terms and conditions of the DIP Facility.

~~To date in fiscal 2007, we have completed three amendments. The seventh amendment, dated June 28,~~14 2006, extended the suspension period established by the fifth amendment from June 3, 2006 through July 29, 2006. On August 25, 2006 the eighth amendment extended the maturity date of the DIP Facility to June 2, 2007 and made certain other financial accommodations, including (1) increased the sub-limit for the issuance of letters of credit to $150.0 million from $125.0 million; (2) extended the period for delivery of financial statements; (3) reset the maximum capital expenditures covenant levels; and (4) amended the cumulative consolidated EBITDA amounts. In addition, the eighth amendment contained a provision that allowed us to use for general corporate purposes fifty percent of the restricted cash previously unavailable to us, with the remaining fifty percent going to partially repay our senior pre-petition loans. The total amount of such restricted cash subject to the eighth amendment was approximately $90.7 million at August 25, 2006. These covenant adjustments and accommodations were made in lieu of extending the suspension period set forth in prior amendments. On February 16, 2007, we completed the ninth amendment, which amended and restated the DIP Facility and extended the maturity date to February 9, 2008, adjusted the eligible real property and finished goods components of the borrowing base, amended the minimum cumulative consolidated EBITDA amounts, limited the amount of cash restructuring charges incurred to $10.0 million and added covenant levels for the extension of the DIP Facility.

~~Senior~~To ~~Secured~~date ~~Credit~~in fiscal 2008, the following amendments to the DIP Facility have been completed. On 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.

~~During~~The ~~fiscal~~second ~~year 2002~~amendment, wedated ~~entered into a $900.0~~November ~~million~~29, ~~Senior~~2007, ~~Secured~~changed ~~Credit~~the ~~Facility~~date ~~agreement with~~for adelivery ~~syndicate~~ of ~~banks and institutional lenders which includes (1)~~ a ~~five-year~~revised ~~$375.0 million~~plan ~~tranche~~detailing Athe ~~term~~Borrower’s ~~loan,~~proposed ~~repayable~~strategy infor ~~quarterly~~maximizing ~~installments;~~the ~~(2) a~~value ~~six-year~~of ~~$125.0 million~~the ~~tranche~~bankruptcy ~~B term loan, repayable in quarterly installments; (3) a six-year $100~~estates.~~0 million~~ ~~tranche C term loan,~~If ~~repayable~~on inor ~~quarterly~~before ~~installments; and (4)~~January ~~a five-year $300.0 million revolving loan~~29, ~~or the revolver~~2008, ~~which~~IBC ~~allowed~~has ~~for~~not upreached toan ~~$215.0 million~~agreement ~~for~~in ~~letters~~principle ofwith ~~credit.~~our Attwo ~~March 10, 2007, we owed~~largest ~~$173.4 million,~~union ~~$111.0 million,~~groups ~~$89.7 million~~ and ~~$73.4 million~~Silver ~~under~~Point ~~tranche~~Finance ~~A, tranche B, tranche C and the revolver, respectively~~L. ~~At March 10, 2007 outstanding letters of credit aggregated $101~~L.~~7 million~~C. ~~At March 10, 2007, there was no availability for additional borrowing~~ (or ~~issuance of~~an ~~letters~~approved ofprovider ~~credit under the revolver. The Senior Secured Credit Facility is secured by all accounts receivable and a majority~~ of ~~owned~~alternate ~~real~~exit ~~property~~financing, ~~intellectual property and equipment.~~ ~~Interest~~if onapplicable) ~~borrowings~~has isnot atannounced ~~either~~its ~~the~~support ~~ABR~~of ~~(as defined in~~ the ~~Senior~~labor ~~Secured Credit Facility) plus 3.0%~~agreements, ~~3.25%~~then, ~~3.0%, and 2.5% for tranche A, tranche B, tranche C, and~~ the ~~revolver,~~lenders ~~respectively,~~may request ~~or,~~in atwriting ~~our~~a ~~option~~plan ~~LIBOR~~to ~~plus~~be ~~4.0%,~~delivered ~~4.25%,~~within ~~4.0%,~~twenty-one ~~and~~days ~~3.5%~~of ~~for~~receipt ~~tranche~~of A,the ~~tranche~~written ~~B, tranche C and~~request.

14On 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.

~~Table~~Senior ofSecured ~~Contents~~Credit Facility

During fiscal year 2002, we entered into a $900.0 million Senior Secured Credit Facility agreement with a syndicate of banks and institutional lenders which includes (1) a five-year $375.0 million tranche A term loan, repayable in quarterly installments; (2) a six-year $125.0 million tranche B term loan, 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, ~~respectively~~which allowed for up to $215.0 million for letters of credit. At ~~March~~November 1017, 2007, we owed $173.5 million, $111.0 million, $89.7 million and $76.0 million under the ~~average~~tranche ~~rate~~A, ~~incurred~~tranche B, tranche C and the revolver, respectively. During the twenty four weeks ended November 17, 2007, the outstanding debt under the revolver was increased by $2.4 million resulting from draws against certain letters of credit. At November 17, 2007, outstanding letters of credit aggregated $89.4 million and there was no availability for ~~these~~additional borrowing or issuance of letters of credit under the revolver. The Senior Secured Credit Facility is secured by all accounts receivable and a majority of owned real property, intellectual property and equipment. Interest on borrowings is at either the ABR (as defined in the Senior Secured Credit Facility) plus 3.0%, 3.25%, 3.0%, and 2.5% ~~aggregate~~for tranche A, tranche B, tranche C, and the revolver, respectively, or at our option LIBOR plus 4.0%, 4.25%, 4.0%, and 3.5% for tranche A, tranche B, tranche C, and the revolver, respectively. Interest on the outstanding borrowings at November 17, 2007 was 9.350%, 9.5%, 8.9%, and 8.6% for tranche A, tranche B, tranche C, and the revolver, respectively. We also pay a facility fee of 0.50% on the ~~revolver~~revolving credit facility commitment (currently in the amount of $~~175~~165.15 million) and fees ranging from 3.625% to 4.0% on the balance of all letters of credit outstanding under the revolver.

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

Due 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.

~~6% Senior Subordinated Convertible Notes~~15

~~On August 12, 2004, we issued $100.0 million aggregate principal amount of our~~ 6.0% ~~senior subordinated~~Senior ~~convertible~~Subordinated ~~notes~~Convertible ~~due August 15, 2014 in a private placement. The notes are~~Notes convertible at the option of the holder under certain circumstances 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. In July 2006, a principal amount of $1,000 was converted to 98 shares of our common stock.

~~Other~~On ~~Matters~~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. The notes are convertible at the option of the holder under certain circumstances 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.

AtOther ~~March 10, 2007, we have classified all of our pre-petition debt as payable within one year due~~Matters to various defaults under the related credit agreements including our Chapter 11 filing on September 22, 2004. Under the Bankruptcy Code, actions to collect pre-petition indebtedness are stayed and our other contractual obligations may not be enforced against us. Therefore, such commitments may not reflect actual cash outlays in the future period.

We have classified ~~the~~all 6%of our debt under the senior ~~subordinated~~secured ~~convertible~~credit ~~notes~~facility and ~~certain~~our capital leases ~~which~~ ~~were~~as ~~converted~~payable within one year due to ~~pre-petition~~various ~~debt,~~defaults ~~all~~under ofthe ~~which~~related ~~are~~credit ~~unsecured~~agreements including our Chapter 11 filing on September 22, as2004. ~~liabilities~~Under ~~subject~~the bankruptcy code, actions to collect ~~compromise~~pre-petition indebtedness are stayed and, inour ~~accordance~~other ~~with~~contractual ~~the~~obligations ~~guidance~~may ~~provided~~not bybe ~~SOP~~enforced against ~~90-7~~us. Therefore, wesuch ~~have~~commitments ~~suspended~~may ~~the~~not ~~accrual of~~reflect ~~interest~~actual oncash ~~this~~outlays ~~debt~~in the future period.

9.We ~~Derivative~~have ~~Instruments~~classified the 6% senior subordinated convertible notes and certain capital leases which 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.

WeDuring ~~are~~the ~~exposed~~second quarter of fiscal 2008, we incurred debt fees of $0.6 million for the October 1, 2007 amendment to ~~market~~our ~~risks~~DIP ~~relative~~Facility and a fee of $5.0 million to ~~commodity~~secure ~~price~~an ~~fluctuations~~exit facility commitment for financing to exit our Chapter 11 proceedings. ToThese ~~manage~~fees ~~the~~are ~~volatility~~included in other ~~associated~~assets ~~with~~in ~~this~~the ~~exposure~~November 17, we2007 ~~utilize~~balance ~~commodity~~sheet. ~~derivative~~The ~~instruments~~exit tofinancing ~~manage~~agreement stipulates that under certain conditions, including the acceptance by the Bankruptcy Court of an alternative financing ~~commodity~~agreement, ~~prices.~~we ~~All~~may ~~financial~~owe ~~instruments~~up ~~are~~to ~~used~~$12.0 million ~~solely~~in ~~for~~breakup ~~hedging~~fees. ~~purposes~~Additionally, ~~and~~certain ~~are~~actions ~~not~~by ~~issued~~the orBankruptcy ~~held~~Court ~~for~~concerning ~~speculative~~our ~~reasons~~emergence could result in the impairment of the $5.0 million commitment fee.

Commodities we use in the production of our products are subject to wide price fluctuations, depending upon factors such as weather, crop production, worldwide market supply and demand and government regulation9. ~~Our~~Derivative ~~objective is to utilize commodity hedging derivatives, including~~Instruments 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 variability of cash flows related to the underlying commodity. The terms of such instruments, and the hedging transactions to which they relate, generally do not exceed one year.

We ~~formally~~are ~~document~~exposed ~~the~~to ~~nature~~market ofrisks ~~and~~relative ~~relationships~~to ~~between~~commodity ~~the~~price ~~hedging~~fluctuations. ~~instruments~~To ~~and~~manage the ~~hedged~~volatility ~~items~~associated atwith ~~the~~this ~~inception~~exposure, ofwe ~~the~~utilize ~~trade,~~commodity asderivative ~~well~~instruments asto ~~its~~manage ~~risk-management~~certain commodity ~~objectives,~~prices. ~~strategies~~All ~~for undertaking~~financial ~~the~~instruments ~~various~~are ~~hedge~~used ~~transactions~~solely for hedging purposes and ~~methods~~are ofnot issued ~~assessing~~or ~~hedge~~held ~~effectiveness~~for speculative reasons.

InCommodities ~~addition,~~we ~~from~~use ~~time~~in the production of our products are subject to ~~time~~wide weprice ~~enter~~fluctuations, depending ~~into~~upon factors such as weather, crop production, worldwide market supply and demand and government regulation. Our objective is to utilize commodity hedging derivatives, inincluding exchange ~~which~~traded wefutures doand ~~not~~options ~~elect~~on wheat, corn, soybean oil and certain fuels, to reduce our ~~apply~~exposure ~~hedge~~to ~~accounting~~commodity price movements for future ingredient and energy needs. ~~Realized~~The strategy is to purchase futures and ~~unrealized~~options ~~gains~~to orhedge ~~losses~~the onvariability ~~these~~of ~~positions~~cash ~~are~~flows ~~recorded~~related in to the ~~consolidated~~underlying commodity. ~~statements~~The terms of ~~operations~~such ininstruments, ~~cost~~and ofthe ~~products~~hedging ~~sold~~transactions orto ~~selling,~~which ~~delivery~~they ~~and~~relate, ~~administrative~~generally ~~expenses~~do asnot ~~appropriate~~exceed one year.

~~Derivative~~We ~~commodity~~enter ~~instruments~~into ~~accounted~~commodity ~~for~~derivatives, ~~under~~principally ~~SFAS~~wheat, ~~No. 133~~corn, ~~are~~soybean ~~subject~~oil, toand ~~mark-to-market accounting~~heating oil, ~~under~~ in which ~~changes~~we indo ~~the~~not ~~market~~elect ~~value~~to ofapply ~~outstanding~~hedge ~~commodities~~accounting. ~~are~~Realized ~~recognized~~and as unrealized gains or losses on these positions are recorded in the consolidated statements of operations ~~or OCI~~ in ~~the~~cost ~~period~~ of ~~change.~~ Weproducts ~~record~~sold ~~the~~or selling, ~~fair~~delivery ~~market~~and ~~value~~administrative ofexpenses ~~our~~as appropriate.

15Derivative commodity instruments accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), are subject to mark-to-market accounting, under which changes in the market value of outstanding commodities are recognized as unrealized gains or losses in the consolidated statements of operations or accumulated other comprehensive income (AOCI) in the period of change. We record the fair market value of our derivatives based on widely available market quotes, as well as information supplied by independent third parties.

~~Table~~During the twenty-four week periods ending November 17, 2007 and November 18, 2006, we did not elect to apply hedge accounting for any of ~~Contents~~our derivative commodity purchases and all such derivatives were marked-to-market

~~derivatives based on widely available market quotes, as well as information supplied by~~16 ~~independent third parties.~~

During the forty week periods ending March 10, 2007 and March 4, 2006, we did not elect to apply hedge accounting for any of our derivative commodity purchases and all such derivatives were marked-to-market through cost of products sold or selling, delivery and administrative expenses, as appropriate. At ~~March~~November 1017, 2007, the fair value ~~and notional amounts~~ of our commodity derivatives ~~were~~ dewas ~~minimis~~a ~~based~~gain of approximately $0.5 million based upon widely available market quotes. AtThere ~~March 4,~~was ~~2006, we held~~ no ~~commodity derivatives in our portfolio. The only~~ derivative activity in ~~OCI~~AOCI for ~~fiscal~~both ~~2006 was~~ the first ~~reclassification~~and tosecond ~~cost~~quarters of ~~products sold of amounts in OCI at~~ fiscal ~~2005 year end~~2008.

We are exposed to credit losses in the event of nonperformance by counterparties on commodity derivatives.

10. Liabilities Subject to Compromise

Under 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. All pre-petition amounts have been classified as liabilities subject to compromise in the fiscal ~~2007~~2008 and ~~2006~~2007 consolidated balance sheets except for secured debt and those other liabilities that we currently expect will not be impaired pursuant to a confirmed plan of reorganization.

On December 14, 2004, the Court entered an Order establishing 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 ~~April~~December 67, 2007, we have received approximately 9,~~100~~200 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 ~~where~~since the deadline to file a claim resulting from ~~lease~~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 received approval from the Court to pay or otherwise honor certain of our pre-petition 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 ~~March 10~~November 17, 2007 on these obligations was approximately $1418.89 million. The unrecorded interest expense for the ~~third~~second quarter of both fiscal ~~2007~~2008 and ~~2006~~2007 on these obligations was approximately $1.84 million and ~~$1.9 million, respectively, and~~ year-to-date for both fiscal ~~2007~~2008 and ~~2006~~2007 unrecorded interest on these obligations was approximately $42.6 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.

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

	March 10,		June 3,
	November 17,		June 2,
	2007		~~2006~~2007
	(dollars in thousands)
Accounts payable	$	~~129~~131,~~960~~012	$	~~129~~130,~~951~~732
Taxes payable		64,~~923~~701		75,~~966~~741
Retirement obligations (SERP and deferred compensation)		1415,~~339~~147		1415,~~598~~063
Legal reserve		13,~~263~~914		1213,~~910~~819
Interest bearing debt and capital leases		106,124		106,~~125~~124
Other		1823,~~200~~711		1519,~~530~~074
	$	~~288~~294,~~809~~609	$	~~287~~290,~~080~~553

Liabilities subject to compromise for taxes payable decreased in fiscal 2008 principally due to the adoption of FIN 48. The increase in other liabilities subject to compromise primarily reflects the settlement of various insurance claims.

1617

~~Table~~11. ofEmployee ~~Contents~~Benefit Plans

~~11.~~American ~~Employee~~Bakers ~~Benefit~~Association ~~Plans~~Retirement Plan

We participate in the American Bakers Association Retirement Plan, or 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 Pension Benefit Guaranty Corporation (PBGC) (as discussed below). As of November 17, 2007, our net pension benefit obligation liability was approximately $70.5 million representing our respective interest in the ABA Plan, reflecting its characterization as an aggregate of single employer plans.

InAs ~~December,~~a ~~2004,~~result weof ~~began~~ a ~~review~~request ~~with~~made ~~respect~~by tous and the ~~proper~~Kettering ~~accounting~~Baking ~~treatment~~Company, ~~for~~another ~~the~~participating ~~American~~employer ~~Bakers~~in ~~Association~~the ~~Retirement~~ABA Plan, orthe ~~ABA Plan~~PBGC, inwhich ~~light~~is ofthe ~~newly~~federal ~~identified~~governmental ~~information. Prior~~agency tothat ~~our~~insures ~~recent~~and supervises ~~restructuring~~defined ~~efforts,~~benefit ~~approximately~~pension ~~900~~plans, ~~active~~revisited ~~IBC~~its ~~employees~~1979 ~~participated under~~determination that the ~~pension~~ABA ~~plan,~~Plan ~~although~~was ~~the~~an aggregate ~~number~~ of ~~active~~single ~~employees~~employer ~~has~~plans ~~significantly~~and ~~decreased~~after asreviewing ~~a result~~the status of the ~~restructuring~~ABA toPlan, ~~approximately~~on ~~350~~August 8, 2006, ~~active~~made ~~employees~~a infinal determination that the ABA Plan asis ofa ~~September~~multiple employer plan under ERISA. On 30August 9, 2006., Wewe ~~had~~filed ~~previously~~a ~~accounted~~lawsuit ~~for~~in ~~the~~Bankruptcy ~~ABA~~Court ~~Plan~~seeking asenforcement aof ~~multi-employer~~the ~~plan~~PBGC’s determination, ~~which~~but ~~resulted~~there ~~in recognition~~can ofbe ~~expense~~no inassurance ~~the~~as to whether we will obtain such enforcement or the amount of any reduction to our ~~actual~~net ~~contributions~~benefit obligation liability. Accordingly, due to the ~~ABA~~lack ~~Plan~~of ~~but~~a definitive ~~did~~resolution ~~not require~~of ~~recognition~~this uncertainty prior to the end of ~~any~~the ~~service~~fiscal ~~cost~~periods orpresented ~~interest~~herein, as ~~cost~~noted orabove ~~for~~we ~~the~~have ~~Company~~continued to ~~record~~reflect ~~any~~our ~~minimum pension~~interests ~~benefit~~in ~~obligation~~the onABA ~~our~~Plan ~~balance~~as ~~sheet~~an aggregate of single employer plans.

~~Upon~~We ~~review,~~believe ~~the Company has determined~~ that ~~the~~treatment ~~ABA Plan is a type~~ of ~~pension plan that requires recognition of service cost and interest cost. Additionally, we have concluded our balance sheet should also reflect~~ the ~~appropriate pension benefit obligation. We believe that the~~ ABA Plan ~~has been historically administered~~ as a multiple employer plan ~~under~~will ~~ERISA~~result ~~and tax rules and should be treated as such. However, the amounts reflected~~ in ~~our~~a ~~financial statements were calculated on the~~significant ~~basis~~reduction ~~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 Pension Benefit Guaranty Corporation (PBGC) (as discussed below). As of March 10, 2007, we have recorded a net pension benefit obligation ~~liability of approximately $61.7 million~~ with respect to our ~~respective~~employee ~~interest~~participants. ~~in the~~The ~~ABA~~ultimate ~~Plan,~~outcome ~~reflecting~~of ~~its~~this ~~characterization~~uncertainty ascannot anpresently ~~aggregate~~be ~~of single employer plans~~determined.

AsSince aJanuary 2006, ~~result~~we ofhave anot ~~request~~ made byrequired usquarterly ~~and~~minimum ~~the~~funding ~~Kettering~~contributions ~~Baking Company, another participating employer~~ in the ~~ABA~~amount of ~~Plan,~~approximately ~~the~~$20.8 million ~~PBGC,~~to ~~which is~~ the ~~federal~~ABA ~~governmental~~Plan ~~agency that insures~~ and ~~supervises~~ ~~defined~~have ~~benefit~~filed ~~pension~~the ~~plans,~~necessary ~~revisited~~reports ~~its~~with ~~1979 determination that~~ the ~~Plan was an~~PBGC ~~aggregate~~reporting ofsuch ~~single~~non-payment. ~~employer~~In ~~plans and after reviewing the status of the ABA Plan~~addition, onsince ~~August~~June 8, 2006, ~~made~~we ahave ~~final~~received ~~determination~~notice ~~that~~of ~~the~~corrective contributions ~~ABA~~under ~~Plan~~the issingle ~~a multiple~~ employer plan ~~under~~assumption ~~ERISA~~totaling ~~and~~approximately ~~tax rules~~$14. ~~On August~~7 9million, ~~2006,~~ which we ~~filed~~do anot ~~lawsuit~~believe inis ~~Bankruptcy~~correct. ~~Court~~We ~~seeking~~have ~~enforcement~~not ofmade ~~the~~such ~~PBGC’s determination,~~contributions ~~but~~pending ~~there~~the ~~can~~resolution beof ~~no assurance as to whether we will obtain such enforcement or~~ the ~~amount~~uncertainties ofsurrounding ~~any~~the ~~reduction~~ABA ~~to our net benefit obligation liability~~Plan. ~~Accordingly~~However, ~~due~~we toexpect that the ~~lack~~amount of asuch contributions ~~definitive~~would ~~resolution~~be ofsignificantly ~~this~~less ~~uncertainty~~if ~~prior to~~ the ~~end~~ABA ofPlan ~~the~~is ~~fiscal~~a ~~periods~~multiple ~~presented~~employer ~~herein, as~~plan ~~noted~~than ~~above~~the weamounts ~~have~~assessed by ~~continued~~the toABA ~~reflect~~Plan ~~our~~on ~~interests~~their inassumption that the ~~ABA~~plan ~~Plan~~was as an aggregate of single employer plans.

WeThe ~~believe that treatment of the~~ ABA Plan’s asnet abenefit ~~multiple~~obligation ~~employer~~liability ~~plan~~is ~~will~~recorded ~~result~~ in aother ~~significant reduction~~liabilities inexcept ~~our~~for ~~net~~the current ~~pension~~portion ~~benefit~~of ~~obligation~~$35.5 million ~~with~~for ~~respect~~both toNovember 17, ~~our~~2007 ~~employee~~and ~~participants~~June 2, ~~from~~2007, ~~that~~ which is ~~reflected~~recorded in accrued ~~the table below~~expenses. The ~~ultimate~~current ~~outcome~~portion ofat ~~this~~November 17, ~~uncertainty~~2007 ~~cannot~~represents ~~presently~~requested beunpaid amounts at ~~determined~~that date.

~~Since January 2006,~~The wecomponents ~~have not made required quarterly minimum funding contributions for a total~~ of ~~approximately $20.8 million to~~ the ~~ABA~~pension ~~Plan~~expense ~~and~~for ~~have filed, or are in~~ the process of filing, the necessary reports with the PBGC. In addition, in June 2006, we received notice of a corrective contribution under the single employer plan assumption totaling approximately $13.9 million, which we do not believe is correct. We have not made such 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 onas ~~the assumption that the plan was~~ an aggregate of single employer plans. are as follows:

The ABA Plan’s net benefit obligation liability is recorded in other liabilities except for the current portion of $37.3 million and $37.5 million for March 10, 2007 and June 3, 2006, respectively, which is recorded in accrued expenses.


	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

1718

~~Table~~Defined ofBenefit ~~Contents~~Pension Plan, Postretirement Health and Life Plans, and Supplemental Executive Retirement Plan

~~The~~Defined ~~components~~Benefit ofPension ~~the pension (credit) expense for the ABA~~ Plan ~~are as follows:~~

	Sixteen Weeks Ended					Forty Weeks Ended
	March 10,		March 4,			March 10,		March 4,
	2007		2006			2007		2006
			(dollars in thousands)
Service cost	$	348	$	486		$	870	$	1,214
Interest cost		1,035		987			2,587		2,467
Expected return on negative plan assets		112		76			280		190
Recognition of actuarial gain		—		(1,709	)		—		(4,271	)
Total periodic pension (credit) cost		1,495		(160	)		3,737		(400	)
Curtailment gain		—		—			—		(1,176	)
Net pension (credit) expense	$	1,495	$	(160	)	$	3,737	$	(1,576	)

In addition to the ABA Plan, we maintain a defined benefit pension plan to benefit certain union and nonunion employee groups, with participation generally resulting from business acquisitions.

~~Defined~~Postretirement ~~Benefit~~Health ~~Pension~~and ~~Plan~~Life Plans

WeIn ~~also~~addition ~~maintain~~to aproviding ~~defined~~retirement ~~benefit~~ pension ~~plan~~benefits, towe ~~benefit~~provide ~~certain~~health ~~union~~care and ~~nonunion~~life ~~employee~~insurance ~~groups,~~benefits ~~with~~for ~~participation~~certain ~~generally~~eligible ~~resulting~~retired ~~from business acquisitions~~employees. ~~The components of the~~ ~~pension expense for the defined benefit pension plan are as follows:~~

	Sixteen Weeks Ended						Forty Weeks Ended
	March 10,			March 4,			March 10,			March 4,
	2007			2006			2007			2006
				(dollars in thousands)
Service cost	$	284		$	278		$	710		$	696
Interest cost		1,221			1,242			3,053			3,106
Expected return on plan assets		(1,662	)		(1,503	)		(4,154	)		(3,757	)
Recognition of
Prior service cost		85			88			211			220
Actuarial loss		10			167			24			415
Net pension (credit) expense	$	(62	)	$	272		$	(156	)	$	680

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.

~~Postretirement~~Supplemental ~~Health~~Executive ~~and~~Retirement ~~Life Plans~~Plan

InWe ~~addition~~established toa ~~providing~~Supplemental ~~retirement~~Executive ~~pension~~Retirement ~~benefits~~Plan (SERP) effective June 2, we2002. ~~provide~~The ~~health~~SERP provided ~~care~~retirement benefits to certain officers and ~~life~~other ~~insurance~~select employees. The SERP is a non-tax ~~benefits~~qualified ~~for~~mechanism, ~~certain~~which ~~eligible~~was ~~retired~~intended to enhance our ability to retain the services of certain employees. The benefits were limited to a maximum of 1.8% of a participant’s final average salary multiplied by the years of credited service up to twenty years.

InSubsequent ~~fiscal~~to ~~2004~~our ~~and~~bankruptcy ~~prior~~filing, ~~under~~we ~~our~~suspended ~~plans,~~the ~~all~~SERP ~~nonunion~~as ~~employees,~~of ~~with 10~~November ~~years~~11, of2004. ~~service after~~Approximately ~~age~~$11.1 million ~~50,~~representing ~~were~~the ~~eligible~~portion ~~for~~of ~~retiree~~the ~~health~~SERP ~~care~~liability, ~~coverage~~at ~~between~~both ~~ages~~November 17, 602007 and ~~65. In April~~June ~~2005~~2, ~~the~~ ~~bankruptcy~~2007, ~~court~~attributable ~~approved a motion~~ to ~~discontinue~~retired ~~nonunion~~participants ~~postretirement~~has ~~health~~been ~~care~~reclassified ~~coverage for all future retirees, although participation is open~~ to ~~grandfathered~~liabilities ~~retirees~~subject ~~and dependents~~to ~~through age 65~~compromise.

~~Certain~~The ~~union~~components ~~employees~~of ~~who~~net ~~have~~periodic ~~bargained~~benefit ~~into~~cost ~~our~~(credit) for ~~company-sponsored~~these ~~health care~~ plans are ~~generally~~ ~~eligible~~as ~~after age 55 to 60, with 10 to 20 years of service, and have no benefits after~~follows: ~~Medicare eligibility is reached. Certain of the plans require contributions by retirees and spouses and a limited number of participants have supplemental benefits after Medicare eligibility.~~


	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

~~Table of Contents~~19

The components of the net postretirement benefit (credit) expense are as follows:


	Twenty-Four 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	$	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

	Sixteen Weeks Ended						Forty Weeks Ended
	March 10,			March 4,			March 10,			March 4,
	2007			2006			2007			2006
	(dollars in thousands)
Service cost	$	226		$	445		$	822		$	1,111
Interest cost		929			1,043			2,595			2,609
Amortization
Unrecognized prior service benefit		(2,274	)		(2,274	)		(5,686	)		(5,686	)
Unrecognized net loss		278			402			762			1,006
Net postretirement benefit (credit) expense	$	(841	)	$	(384	)	$	(1,507	)	$	(960	)

12. Stock-Based Compensation

InEffective ~~the~~June 4, ~~third~~2006, ~~quarter~~we adopted the provisions of ~~fiscal~~SFAS ~~2007~~No. 123R, weShare-Based ~~adjusted~~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 ~~net~~cost ~~postretirement~~of ~~benefit~~employee services ~~expense~~received in exchange for an award of equity instruments based on anthe ~~updated~~grant-date ~~interim~~fair ~~fiscal~~value and ~~2007~~to ~~actuarial~~recognize ~~valuation~~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.

12We adopted SFAS 123R using the modified prospective method. ~~Supplemental~~The ~~Executive~~cumulative ~~Retirement~~impact ~~Plan~~of adopting SFAS 123R on the unvested equity-based awards, which were granted prior to 2007, was inconsequential to the consolidated statement of operations.

We1996 ~~established~~Stock aIncentive ~~Supplemental Executive Retirement~~ Plan ~~(SERP) effective June 2, 2002. The SERP~~ provided retirement benefits to certain officers and other select employees. The SERP is a non-tax qualified mechanism, which was intended to enhance our ability to retain the services of certain employees. The benefits were limited to a maximum of 1.8% of a participant’s final average salary multiplied by the years of credited service up to twenty years.

AsThe of1996 ~~November 11~~Stock Incentive Plan (the Plan) allows us to grant to employees and directors various stock awards including stock options, ~~2004~~which are granted at prices not less than the fair market value at the date of grant, weand ~~suspended~~restricted and deferred shares. A maximum of approximately 18.7 million shares was approved by our stockholders to be issued under the ~~SERP~~Plan. ~~Approximately~~On ~~$10~~November 17, 2007, shares totaling approximately 9.67 million ~~representing~~were authorized but not awarded under the Plan. The stock ~~portion~~options ofmay ~~the~~be ~~SERP~~granted ~~liability,~~for ata ~~both~~period ~~March 10,~~not ~~2007~~to exceed ten years and ~~June 3,~~generally ~~2006,~~vest ~~attributable~~from one to ~~retired~~three ~~participants~~years ~~has~~from ~~been~~the ~~reclassified~~date toof ~~liabilities~~grant. ~~subject~~Our current practice is to ~~compromise~~settle awards out of treasury stock.

~~SERP~~An ~~expense~~analysis ~~was~~of ~~$0.4 million~~our ~~for~~stock ~~both~~option ~~sixteen~~activity ~~week~~is ~~periods~~as ~~ended and $1.0 million for both forty~~follows: ~~week periods ended March 10, 2007 and March 4, 2006, respectively, which represented interest cost.~~

13. Stock-Based Compensation


						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

~~Effective June 4, 2006, we adopted the provisions of SFAS 123R, which generally requires public~~20 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.

WeThere ~~adopted~~were ~~SFAS~~no ~~123R~~stock ~~using~~options ~~the~~granted ~~modified~~or ~~prospective~~exercised ~~method.~~in Inboth ~~accordance with~~ the ~~modified prospective~~first ~~transition~~and ~~method,~~second ~~our~~quarters ~~consolidated financial statements for prior periods have not been restated to reflect the impact~~ of ~~SFAS 123R. The cumulative impact of adopting SFAS 123R on~~fiscal ~~the~~2008 ~~unvested~~and ~~equity-based awards, which were granted prior to~~ 2007~~, was inconsequential to the consolidated financial statements~~.

~~1996~~On ~~Stock~~January 23, ~~Incentive~~2004, we exchanged outstanding options to purchase shares of our common stock with 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.

The ~~1996~~table ~~Stock~~below ~~Incentive~~summarizes ~~Plan (~~the ~~Plan)~~nonvested ~~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 March 10, 2007, shares totaling approximately 8.7 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~~transactions: ~~years from the date of grant. Our current practice is to settle awards out of treasury stock.~~


				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

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

~~The~~On ~~year-to-date~~November 17, ~~analysis~~2007, approximately 12.7 million total shares of ~~our~~common stock ~~option~~were ~~activity~~reserved isfor issuance asunder ~~follows:~~various employee benefit plans.

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise Price		Contractual		Aggregate
	Shares			Per Share		Term		Intrinsic Value
								(dollars in
	(in thousands)							thousands)
Outstanding, beginning of period		4,099		$	16.41
Expired		(580	)		18.17
Outstanding, end of period		3,519			16.12		4.31	$	25,347
Options exercisable, end of period		3,519			16.12		4.31	$	25,347

13. Restructuring Charges (Credits)

On January 23, 2004, we exchanged outstanding options to purchase shares of our common stock with exercise prices of $25.00 or greater held by certain eligible employees for shares of restricted stock. The ~~offer~~components ~~resulted in the exchange~~ of ~~options~~restructuring 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 our 1996 Stock Incentive Plan. We used approximately 0.5 million shares of treasury stock for the award. Net unearned compensation of approximately $7.4 million is being charged to expense over the vesting period, net of surrenders, with expense charges of a de minimis amount for the third quarters of fiscal 2007 and 2006 due to surrenders at vesting of restricted share awards. Expense for the third quarter year-to-date periods in fiscal 2007 and 2006 was $0.4(credits) ~~million~~are ~~and~~as ~~$0.6 million, respectively, of which~~follows: approximately $0.2 million was recognized in selling, delivery, and administrative expenses and $0.2 million in cost of products sold in the third quarter year-to-date of fiscal 2007 and approximately $0.4 million in selling, delivery, and administrative expenses and $0.2 million in cost of products sold in the third quarter year-to-date of fiscal 2006.

As required by SFAS 123R, unearned compensation of $1.9 million, which was previously reflected as a reduction to stockholders’ equity as of June 3, 2006, was reclassified as a reduction to additional paid-in capital.


	Twelve Weeks Ended						Twenty-Four Weeks Ended
	November 17,			November 18,			November 17,			November 18,
	2007			2006			2007			2006
	(dollars in thousands)
Severance charges	$	7,651		$	67		$	7,595		$	296
Long-lived asset credits		(395	)		(4,787	)		(493	)		(5,195	)
Other exit costs		673			527			779			1,235

Total	$	7,929		$	(4,193	)	$	7,881		$	(3,664	)

~~The~~Fiscal ~~table~~2008 ~~below~~Activity ~~summarizes the nonvested restricted stock transactions:~~

				Weighted
				Average
				Grant Date
	Shares			Fair Value
	(in thousands)
Nonvested, beginning of period		162		$	14.49
Vested		(42	)		14.80
Surrendered		(44	)		14.23
Nonvested, end of period		76			14.47

There were two new restructuring plans approved in the second quarter of fiscal 2008. First, 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 of the sales and route delivery of our baked goods.

~~The total compensation cost related to nonvested restricted stock awards not yet recognized as~~21 ~~of March 10, 2007 was $0.9 million and is expected to be fully amortized by the fourth quarter of fiscal 2008.~~

In ~~addition, $(0.3) million was recognized in~~ the second ~~third~~ quarter of fiscal ~~2007~~2008, aswe aeliminated ~~result~~approximately ~~of deferred~~1,200 ~~share~~employee ~~awards~~positions ~~disclaimed~~and recognized byseverance ~~former~~and ~~members~~related ofbenefit ~~our~~costs ~~Board~~ of ~~Directors,~~approximately ~~of which~~ $(05.2) 7 million ~~was~~related ~~recognized~~to inclosing ~~selling,~~the bakery ~~delivery~~facilities, depots and ~~administrative~~routes ~~expenses~~in ~~and~~Southern ~~$(0~~California.1) ~~million~~Additionally, inwe ~~cost~~incurred other exit costs of ~~products~~approximately ~~sold~~$0.3 million principally for security related to the closed facilities.

OnRelated ~~March 10,~~to ~~2007~~our sales reorganization activities, ~~approximately~~in ~~12.7 million~~the ~~total~~second ~~shares~~quarter of ~~common~~fiscal ~~stock~~2008 ~~were~~we ~~reserved~~eliminated approximately 200 sales management positions for which we incurred costs for severance and benefit ~~issuance~~costs ~~under~~of ~~various~~$1.1 million and employee ~~benefit~~relocation ~~plans~~expense of approximately $0.3 million.

20In the second quarter of fiscal 2008, we accrued additional employee-related charges aggregating approximately $0.8 million in connection with our fiscal 2006 profit center review. Also, we realized a gain on sale of assets of approximately $0.5 million and additional expense for utilities, security and clean up of approximately $0.2 million related to our fiscal 2005 profit center review.

~~Table~~These costs incurred in the second quarter of ~~Contents~~fiscal 2008 were generally consistent with the fiscal 2008 year-to-date restructuring charges incurred.

~~Pro~~The ~~Forma~~fiscal ~~Employee Stock~~2008 year-~~Based~~to-date ~~Compensation~~analysis ~~Expense~~of our restructuring costs activity is as follows:

Prior to June 3, 2006, we accounted for stock-based employee compensation in accordance with the provisions and related interpretations of APB Opinion 25. Had compensation cost for share-based awards been determined consistent with SFAS 123R, as amended by SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, which required pro forma disclosures determined through the use of an option-pricing model as if the provisions of SFAS 123R had been adopted.


	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		—			—			—		—

~~Had we adopted the provisions of SFAS 123R in the first quarter of 2006, estimated pro forma net~~22 ~~income and earnings per share would have been as follows:~~

	Sixteen
	Severance			Long-Lived
	Weeks			Forty
	and Related			Asset
	Ended			Weeks Ended
	Benefits			Charges
	March 4, 2006
	(Charges)			(Credits)			Other			Total
	(dollars in thousands, except per share data)
	(dollars in thousands)
Net loss, as reported	$	(42,634	)	$	(102,946	)
FY 2008 Southern California
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		11			641
Balance June 2, 2007		—			—			—		—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(138	)		(989	)
Expensed in Fiscal 2008		5,756			—			280			6,036
Pro forma net loss	$	(42,761	)	$	(103,294	)
Cash Paid in Fiscal 2008		(3,300	)		—			(280	)		(3,580	)
Basic and diluted loss per share
Noncash Utilization in 2008		—			—			—		—
As reported	$	(0.94	)	$	(2.28	)
Balance November 17, 2007		2,456			—			—			2,456
Pro forma		(0.95	)		(2.29	)
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

~~14.~~Fiscal ~~Restructuring~~2007 ~~(Credits)~~Activity ~~Charges~~

~~The~~In ~~components~~the ofsecond quarter fiscal 2007, we continued with our restructuring ~~(credits)~~activities and incurred severance charges of approximately $0.1 million related to the consolidation and closing of one additional accounting office. Year-to-date fiscal 2007 severance charges ~~are~~related asto ~~follows:~~accounting office closings were approximately $0.3 million and a total of two accounting offices were closed.

	Sixteen Weeks Ended						Forty Weeks Ended
	March 10,			March 4,			March 10,			March 4,
	2007			2006			2007			2006
				(dollars in thousands)
Severance (credits) charges	$	(680	)	$	1,252		$	(384	)	$	5,756
Long-lived asset (credits) charges		4			(36,381	)		(5,191	)		(32,094	)
Curtailment gain on a benefit plan		—			—			—			(706	)
Other exit costs		430			1,797			1,665			5,367
Total	$	(246	)	$	(33,332	)	$	(3,910	)	$	(21,677	)

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 $4.5 million, comprised primarily of a gain on the sale of real property of $4.7 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.

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

InDuring the ~~third~~second quarter fiscal 2007, we recorded restructuring costs related to the Profit Center restructuring plan that was initiated in the fourth quarter of fiscal ~~2007~~2005 to consolidate production, nodelivery ~~new~~routes, depots and bakery outlets. The $0.2 million net restructuring ~~activities~~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.

23 Year-to-date fiscal 2007 restructuring costs related to the fiscal 2005 consolidation and company-wide reduction in force (RIF) were $0.3 million, comprised of $0.2 million in other exit costs and $0.1 million in net loss on the sale of real estate and equipment.

~~For~~Cumulative ~~the third quarter of fiscal 2007, we realized a~~ restructuring credit of approximately $0.3 million due to the expiration of certain obligations for severance payments associated with the Profit Center Review plan that was initiated in the fourth quarter of fiscal 2005 to consolidate production, delivery routes, depots and bakery outlets. Year-to-date for fiscal 2007, we realized $0.2(credits) ~~million of net restructuring~~ charges, ~~including $0.8 million of other exit charges, offset~~ by ~~$0.3 million~~ ~~from~~plan ~~net gains on sale of property and $0.3 million~~ (in ~~severance credits.~~thousands):


			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

~~Table~~Expected ofremaining ~~Contents~~restructuring charges by plan (in thousands):

As part of our ongoing efforts initiated in fiscal 2006 to consolidate operations to achieve production efficiencies, we realized a net restructuring credit of $0.1 million in the third quarter of fiscal 2007, comprised of $0.2 million of other exit costs for taxes, security, and utilities, offset by $0.3 million due to the expiration of certain obligations for severance payments. Year-to-date for fiscal 2007, we realized a net restructuring credit of $4.7 million related to the fiscal 2006 consolidation efforts, comprised primarily of net gains on the sale of real estate and equipment of $5.0 million, and restructuring credits due to the expiration of certain obligations for severance payments of $0.3 million, partially offset by additional miscellaneous exit costs of $0.6 million.


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

~~Year-to-date~~14. ~~severance~~Reorganization ~~charges for two accounting office closings in fiscal 2007 were~~Charges ~~approximately $0.2 million.~~

The ~~fiscal~~components ~~2007 year-to-date analysis~~ of ~~our~~reorganization ~~restructuring~~charges ~~costs~~are ~~activity is~~ as follows:

				Long-Lived
	November 17, 2007
	Severance			Asset
	Twelve Weeks			Twenty-Four Weeks
	and Related			Charges
	Ended			Ended
	Benefits			(Credits)			Other			Total
	Reorganization			Reorganization			Cash
				(dollars in thousands)
	Charges			Charges			Payments
Fiscal 2004 Plan
	(dollars in thousands)
Balance June 3, 2006	$	—		$	—		$	—		$	—
Professional fees	$	12,404		$	19,954		$	15,215
Expensed in Fiscal 2007		—			(8	)		4			(4	)
Employee retention expenses (credits)		—			(151	)		259
Cash Paid in Fiscal 2007		—			—			(4	)		(4	)
Lease rejection charges		123			266			—
Noncash Utilization in Fiscal 2007		—			8			—			8
Interest income		(639	)		(983	)		(774	)
Balance March 10, 2007		—			—			—			—
Gain on sale of assets		(181	)		(181	)		(181	)
Fiscal 2005 Consolidation & RIF Plan
Reorganization charges, net	$	11,707		$	18,905		$	14,519
Balance June 3, 2006		199			—			—			199
Expensed in Fiscal 2007		6			84			201			291
Cash Paid in Fiscal 2007		(197	)		—			(201	)		(398	)
Noncash Utilization in Fiscal 2007		—			(84	)		—			(84	)
Balance March 10, 2007		8			—			—			8
Fiscal 2005 PC Review Plan
Balance June 3, 2006		893			—			98			991
Expensed in Fiscal 2007		(317	)		(309	)		836			210
Cash Paid in Fiscal 2007		(541	)		—			(934	)		(1,475	)
Noncash Utilization in Fiscal 2007		—			309			—			309
Balance March 10, 2007		35			—			—			35
Fiscal 2006 PC Review Plan
Balance June 3, 2006		1,000			—			45			1,045
Expensed in Fiscal 2007		(264	)		(4,958	)		569			(4,653	)
Cash Paid in Fiscal 2007		(643	)		—			(614	)		(1,257	)
Noncash Utilization in Fiscal 2007		—			4,958			—			4,958
Balance March 10, 2007		93			—			—			93
Accounting Office Closings
Balance June 3, 2006		345			—			—			345
Expensed in Fiscal 2007		191			—			55			246
Cash Paid in Fiscal 2007		(417	)		—			(37	)		(454	)
Noncash Utilization in Fiscal 2007		—			—			—			—
Balance March 10, 2007		119			—			18			137
Consolidated
Balance June 3, 2006		2,437			—			143			2,580
Expensed in Fiscal 2007		(384	)		(5,191	)		1,665			(3,910	)
Cash Paid in Fiscal 2007		(1,798	)		—			(1,790	)		(3,588	)
Noncash Utilization in Fiscal 2007		—			5,191			—			5,191
Balance March 10, 2007	$	255		$	—		$	18		$	273

2224


	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~~15. ~~2006~~Income ~~Activity~~ Taxes

WeThe ~~recorded~~reconciliation aof ~~net~~the ~~restructuring~~provision ~~credit~~for inincome ~~year-to-date~~taxes ~~fiscal 2006 of $10.6 million related~~ to ~~our~~ ~~fiscal 2004 plan that resulted from a net gain realized upon~~ the ~~sale~~statutory offederal ~~one~~rate ofis ~~our~~as ~~bakeries of~~follows: ~~$10.8 million, net of additional restructuring charges of $0.2 million recorded in third quarter, primarily comprised of changes in estimates of real estate and equipment fair values.~~

Continuing with the process of consolidating operations carried on in fiscal 2005 to achieve production efficiencies, we incurred an additional $0.3 million in restructuring charges for year-to-date fiscal 2006, all recorded in the first and second quarters, related primarily to real estate taxes, security, utilities, and clean up charges.


	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	%

InThe ~~the~~income ~~fourth~~tax ~~quarter~~benefit ofwe ~~fiscal~~have ~~2005,~~recognized wein ~~undertook~~2008 ~~restructuring~~relates ~~efforts~~principally atto ~~three~~expected refunds of ~~our~~tax ~~Profit~~we ~~Centers~~previously inpaid, ~~order~~available to ~~consolidate~~us ~~production,~~pursuant ~~delivery~~to ~~routes,~~a ~~depots,~~federal ~~and~~statutory ~~bakery~~provision ~~outlets.~~that ~~The continuation~~permits ofcertain ~~this~~net operating ~~review~~losses ~~process~~to inbe ~~fiscal~~carried ~~2006~~back ~~resulted~~ten inyears, including a ~~year-~~related reduction to~~-date~~ ~~net~~our ~~restructuring~~valuation ~~credit~~allowance ofby $102.30 million, ~~with~~due to a ~~$10.5 million~~change ~~net~~in ~~restructuring~~circumstances ~~credit~~causing ~~being~~a ~~recorded~~change in ~~the~~judgment ~~third~~about our ~~quarter.~~ability ~~The year-~~to~~-date~~ ~~net~~realize ~~restructuring~~the ~~credit~~value ~~included~~of aour ~~$0.4 million~~deferred ~~credit~~tax ~~for~~assets ~~the adjustment~~originating ofin ~~severance~~prior ~~costs,~~years. ~~impairment~~Only ~~charges~~a onportion of ~~bakery~~the ~~equipment~~net ofoperating ~~$1.9 million~~loss ~~($1.7 million in~~we ~~third~~incur ~~quarter),~~is ~~net~~eligible ~~gains~~for onthis ~~the~~treatment. ~~sale~~Our ofeffective ~~certain~~tax ~~real~~rate ~~property~~for fiscal ~~and~~2008 ~~equipment~~is ofbased, ~~$13.2 million ($12.7 million~~ in ~~third~~large ~~quarter)~~part, aupon ~~$0.7 million~~our ~~credit~~estimate ~~resulting~~of ~~from~~the ~~curtailment~~amount ~~gains~~of onour ~~a pension~~fiscal ~~plan~~2008 ~~related~~loss towhich we ~~this~~expect ~~restructuring~~to ~~effort,~~be ~~and~~eligible ~~other~~for ~~exit~~the ~~costs~~ten-year ~~of $2~~carryback.~~1 million~~ ~~($0.5 million~~Our intax ~~third~~provision ~~quarter)~~ for ~~relocation~~fiscal ~~and~~2007 ~~further~~also reflects ~~utility~~the ~~costs,~~impact ~~security,~~of ~~taxes,~~the ~~and~~ten-year ~~clean up activities~~carryback.

InWe ~~fiscal~~provide ~~2006,~~a wevaluation ~~continued~~allowance ~~the~~against ~~review~~deferred oftax ~~our~~assets ~~Profit Centers and initiated further restructuring activities. During the first three quarters~~if, webased ~~closed~~on ~~four~~management’s ~~bakeries, two in the first quarter and two in the~~assessment ~~second~~of ~~quarter,~~operating ~~and~~results ~~consolidated operations by standardizing distribution~~ and ~~consolidating~~ ~~production~~other ~~routes,~~available ~~depots and bakery outlets. In addition~~evidence, weit ~~sold~~is ~~certain~~more ~~properties associated~~likely ~~with~~than ~~our~~not ~~2006~~that ~~restructuring~~some ~~activities~~or ~~for~~all ~~a gain. These restructuring activities resulted in a net restructuring credit~~ of ~~approximately $23.1 million in the third quarter and a~~ ~~year-to-date fiscal 2006 restructuring credit of approximately $1.2 million. We recorded severance charges of $1.3 million for~~ the ~~elimination~~deferred oftax ~~approximately~~assets ~~230~~will ~~employee~~not ~~positions~~be ~~during the third quarter of fiscal 2006, bringing the year-to-date total of employee positions eliminated to approximately 2,074 and year-to-date severance charges to $6~~realized.~~2 million.~~ InValuation ~~the~~allowances ~~third~~were ~~quarter, we~~ recorded ~~a net gain on the sale of certain real property and equipment of $26.0 million, partially offset by year-to-date asset impairment charges of $15.9 million ($0.5 million~~ in ~~the~~fiscal ~~third quarter)~~2008 ~~to adjust real estate~~ and ~~equipment to fair value. We incurred other miscellaneous exit~~ ~~costs~~2007 inagainst ~~year-to-date~~deferred ~~fiscal~~tax ~~2006~~assets oforiginating ~~$2.8 million ($1.2 million~~ in ~~the~~those ~~third quarter)~~periods.

~~The~~We ~~cumulative~~adopted ~~restructuring~~the ~~charges~~provisions ~~recognized~~of ~~through~~FIN 48 on June 3, 2007. In accordance with the ~~third~~recognition ~~quarter~~standards established ofby ~~fiscal~~FIN ~~2007~~48, aswe ~~well~~performed a comprehensive review of potential uncertain tax positions in aseach ~~expected~~jurisdiction ~~remaining~~in ~~charges~~which ~~through~~we ~~plan~~operate. ~~completion~~As a result of our review, ~~are~~we ~~summarized~~adjusted inthe carrying amount of the ~~two~~liability ~~tables~~for ~~below~~unrecognized tax benefits resulting in an increase to stockholders’ accumulated deficit of $3.6 million. Upon adoption, we recorded an increase to other long-term ~~Most~~liabilities of ~~the~~$2.9 million, ~~remaining~~a ~~costs~~reduction ~~are~~to ~~expected~~other current assets of $1.7 million, and a reduction to beliabilities ~~incurred~~subject ~~during~~to ~~the~~compromise ~~next~~of ~~year~~$1.0 million. Our valuation allowance against deferred tax assets includes $3.7 million and $4.8 million relating to unrecognized tax benefits as of November 17, 2007 and June 3, 2007, respectively.

~~Cumulative~~Our ~~restructuring~~total ~~(credits)~~liability for unrecognized tax benefits, including interest and penalties, is $10.6 million for both November 17, 2007 and June ~~charges~~3, by2007. ~~plan~~The ~~(in~~portion ~~thousands):~~of these balances which will favorably impact the effective tax rate, if recognized, is $10.6 million.

			Long-Lived
	Severance		Asset
	and Related		Charges
	Benefits		(Credits)			Other			Total
Fiscal 2004 Plan	$	2,537	$	(8,091	)	$	7,006		$	1,452
Fiscal 2005 Consolidation & RIF Plan		5,581		6,473			2,784			14,838
Fiscal 2005 PC Review Plan		6,889		18,348			(4,192	)		21,045
Fiscal 2006 PC Review Plan		5,899		(19,358	)		3,594			(9,865	)
Accounting Office Closings		536		—			55			591

23We 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.

~~Table~~Our U.S. federal income tax returns have been examined by the Internal Revenue Service through fiscal 2005. With limited exception, in accordance with bankruptcy law, we believe that any audits of ~~Contents~~our state income tax returns for years prior to fiscal 2007 would not result in additional liabilities to us. We have various income tax returns in the process of examination or administrative appeal. To the extent that these matters conclude, it is reasonably possible that the amount of our unrecognized tax benefits will increase or decrease. However, we do not currently expect resolution of these matters to result in significant changes during the next twelve months.

~~Expected~~16. ~~remaining~~Commitments ~~restructuring~~and ~~charges by plan (in thousands):~~Contingencies

	Severance
	and Related
	Benefits		Other		Total
Fiscal 2005 PC Review Plan	$	—	$	644	$	644
Fiscal 2006 PC Review Plan		—		224		224
Accounting Office Closings		103		—		103

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). 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 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. 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. ~~Reorganization~~The ~~Charges~~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.

~~The~~In ~~components~~June 2003, a purported shareholder derivative lawsuit was filed in Missouri state court against certain current and former officers and directors of ~~reorganization~~IBC, ~~charges~~seeking ~~are~~damages asand ~~follows:~~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.

	March 10, 2007
	Sixteen Weeks			Forty Weeks
	Ended			Ended
	Reorganization			Reorganization			Cash
	Charges			Charges			Payments
	(dollars in thousands)
Professional fees	$	10,548		$	29,003		$	29,623
Employee retention expenses		316			1,016			1,968
Lease rejection charges (credits)		(44	)		54			—
Interest income		(839	)		(2,560	)		(3,366	)
Gain on sale of assets		(1	)		(826	)		(826	)
Reorganization charges, net	$	9,980		$	26,687		$	27,399

	March 4, 2006
	Sixteen Weeks			Forty Weeks
	Ended			Ended
	Reorganization			Reorganization			Cash
	Charges			Charges			Payments
	(dollars in thousands)
Professional fees	$	10,136		$	25,901		$	27,165
Employee retention expenses		1,347			5,753			4,323
Lease rejection charges (credits)		618			547			—
Interest income		(1,846	)		(3,202	)		(2,797	)
Gain on sale of assets		—			(597	)		(597	)
Reorganization charges, net	$	10,255		$	28,402		$	28,094

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.

24The EPA has made inquiries into the refrigerant handling practices of companies in our industry. In September 2000, we received a request for information from the EPA relating to our handling of 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.

~~Table~~On June 11, 2003, the South Coast Air Quality Management District in California, or SCAQMD, issued a Notice of ~~Contents~~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 of Violation alleges we were in violation of the permit through 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 received 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 claim through an allowed, pre-petition, general unsecured claim in the amount of $150,000, which is awaiting finalization of a stipulation to be filed with the Bankruptcy Court.

16We 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. ~~Income~~However, ~~Taxes~~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.

~~The reconciliation of the provision for income taxes to the statutory federal rate is as follows:~~27

	Forty Weeks Ended
	March 10,			March 4,
	2007			2006
Statutory federal tax rate		35.0	%		35.0	%
State income tax, net		1.1			1.1
Valuation allowance increase		(30.9	)		(26.6	)
Adjustments to prior year tax accruals		0.3			3.5
Other		(1.7	)		(1.1	)
		3.8	%		11.9	%

As 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 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. Accordingly, due to the lack of a definitive resolution of this uncertainty prior to the end of the fiscal periods presented herein, as noted above we have continued to reflect our interests in the ABA Plan as an aggregate of single employer plans.

~~The~~In ~~income~~our ~~tax~~December 2005 ~~benefit~~submission werequested ~~have~~by ~~recognized~~the PBGC in ~~2007~~connection ~~relates~~with ~~principally~~its toreview ~~expected~~of ~~refunds~~the of1979 ~~tax~~determination wereferred ~~previously~~to ~~paid~~above, ~~available~~we toasserted usour ~~pursuant~~belief tobased aon ~~federal~~available ~~statutory~~information ~~provision~~ that ~~permits~~ ~~certain~~treatment ~~net~~of ~~operating~~the ~~losses~~ABA toPlan beas ~~carried~~a ~~back~~multiple ~~ten~~employer ~~years.~~plan ~~Only~~will aresult ~~portion~~in ofan ~~the~~allocation ~~net~~of ~~operating~~pension ~~loss~~plan weassets ~~incur~~to isour ~~eligible~~pension ~~for~~plan ~~this~~participants ~~treatment~~in an amount equal to approximately $40 million. ~~Our~~We believe ~~effective~~that ~~tax~~treatment ~~rate~~of ~~for~~the ~~fiscal~~ABA ~~2007~~Plan isas ~~based,~~a inmultiple ~~large part,~~employer ~~upon~~plan ~~our~~will ~~estimate~~result ofin ~~the~~a ~~amount~~significant reduction ofin our ~~fiscal~~net ~~2007~~pension ~~loss~~benefit ~~which~~obligation wewith ~~expect~~respect to beour ~~eligible~~employee ~~for~~participants from that ~~the~~which ~~ten~~is ~~year~~reflected ~~carryback~~in Note 11. ~~Our~~Employee ~~fiscal~~Benefit ~~2006~~Plans ~~tax~~to ~~provision~~these ~~also~~condensed ~~reflects~~consolidated ~~the~~financial statements. ~~impact~~The ultimate outcome of ~~the~~this ~~ten~~uncertainty ~~year carryback~~cannot presently be determined.

~~The~~In ~~amount~~addition, ofwe ~~income~~have ~~taxes~~received requests for additional corrective contributions since January 2006, under the single employer plan assumption, which we ~~pay~~do not believe is ~~subject~~correct. toWe ~~periodic~~have ~~audits~~not made such 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 ~~federal~~the ABA Plan on their assumption that the plan was an aggregate of single employer plans. On May 3, ~~state~~2006, Sara Lee Corporation instituted proceedings against the ABA Plan and ~~local~~the ~~tax~~Board of Trustees ~~authorities,~~of ~~which~~the ~~result~~Plan in(the ~~proposed~~“Board ~~assessments~~of ~~from~~Trustees”) ~~time~~in tothe ~~time.~~United ~~Our~~States ~~estimate~~District Court for the ~~potential~~District of ~~outcome~~Columbia ~~for~~(the ~~any~~“District ~~uncertain~~Court”). ~~tax~~Sara ~~issue~~Lee isCorporation ~~highly~~v. ~~judgmental~~American Bakers Ass’n Retirement Plan, et al., WeCase ~~believe~~No. 1:06-cv-00819-HHK we(D.D.C.) ~~have~~(the ~~adequately~~“Sara ~~provided~~Lee Litigation”). The relief Sara Lee seeks ~~for~~includes, ~~any~~among ~~reasonable~~other ~~foreseeable~~things, ~~outcome~~a ~~related~~mandatory injunction that would compel the ABA Plan and the Board of Trustees to ~~these~~(i) require ~~matters.~~all ~~However,~~participating ~~our~~employers ~~future~~in ~~results~~the ~~may~~ABA Plan with negative asset ~~include~~balances— ~~favorable~~which orwould ~~unfavorable~~include ~~adjustments~~the Company — to ~~our~~make ~~estimated~~payments ~~tax~~to ~~liabilities~~the Plan in order to maintain a positive asset balance and (ii) cut off the ~~period~~payment from the ABA Plan of benefits to ~~assessments~~employee-participants ~~are~~of ~~made~~the orCompany ~~resolved~~and other participating employers with negative asset balances, orto ~~when~~the ~~statutes~~extent ofsuch ~~limitation~~employers ondid ~~potential~~not ~~assessments~~maintain ~~expire~~a positive balance. However, the Sara Lee ~~During~~Litigation is premised on the ~~first~~notion ~~quarter~~that the ABA Plan is an aggregate of ~~fiscal~~single ~~2006~~employer plans, which weis ~~adjusted~~inconsistent ~~our~~with ~~prior~~the ~~year~~PBGC’s ~~tax~~determination ~~accruals~~dated ~~based~~August 8, ~~upon~~2006 that the ABA Plan is a ~~review~~multiple ofemployer ~~recently~~plan. ~~closed~~On ~~audits~~September 29, 2006, Sara Lee filed an amended complaint adding the PBGC as a defendant and challenging the ~~status~~PBGC’s ofAugust 8, ~~prior~~2006 ~~tax~~determination. ~~years~~In ~~relative~~order to ~~the~~obtain ~~statutes~~a resolution of ~~limitation,~~ asthese ~~well~~matters aswithout ~~for~~litigation over the ~~approval~~proper offorum, ~~tax~~we ~~credits~~have ~~for~~voluntarily ~~prior~~stayed our ~~years~~lawsuit in Bankruptcy Court seeking enforcement of the August 8, ~~which~~2006 ~~had~~determination aupon ~~significant~~the ~~favorable~~agreement ~~impact~~by onthe ~~our~~ABA ~~effective~~Plan ~~tax~~and ~~rate~~its ~~for~~Board ~~fiscal~~of ~~2006~~Trustees to join IBC as a party to the Sara Lee Litigation.

WeOn ~~provide~~December 4, a2006, ~~valuation~~the ~~allowance~~ABA ~~against~~Plan ~~deferred~~and ~~tax~~the ~~assets~~Board ~~if,~~of ~~based~~Trustees onserved ~~management’s~~a ~~assessment~~summons upon us as a third ofparty ~~operating~~defendant ~~results~~to a Third Party Complaint filed in the Sara Lee Litigation against Sara Lee and the other ~~available~~participating ~~evidence,~~employers itin isthe ~~more~~ABA ~~likely~~Plan. ~~than~~The ~~not~~Third ~~that~~Party ~~some~~Complaint orseeks ~~all~~a ofdeclaratory judgment as to the ~~deferred~~nature ~~tax~~of ~~assets~~the ~~will~~ABA ~~not~~Plan and further asserts that the August 8, 2006 determination was arbitrary and capricious and should be ~~realized~~rescinded. ~~Valuation~~At ~~allowances~~this ~~were~~time, ~~recorded~~we inbelieve ~~fiscal~~all ~~2007~~relevant ~~and~~parties ~~fiscal~~have ~~2006~~been ~~against~~joined ~~deferred~~to ~~tax~~the ~~assets~~Sara ~~originating~~Lee inLitigation ~~those~~and ~~years~~the District Court for the District of Columbia will review the PBGC’s determination.

~~17.~~On ~~Commitments~~November 22, 2006, the ABA Plan and ~~Contingencies~~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’s motion.

~~On September 22, 2004, or the Petition Date, we and each of our wholly-owned subsidiaries filed~~28 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 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. 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~~April 124, ~~2004~~2007, wethe ~~issued~~PBGC ~~$100.0~~filed a motion for summary judgment in the Sara Lee Litigation asking the District Court to enforce the PBGC’s August ~~million~~8, ~~aggregate~~2006, ~~principal~~determination ~~amount~~that ofthe ~~our~~ABA 6Plan is a multiple employer plan.0% ~~senior~~Briefing on the PBGC’s motion for summary judgment concluded on June 8, ~~subordinated~~2007, ~~convertible~~and ~~notes~~oral ~~due~~argument ~~August~~was heard on July 152, ~~2014~~2007. inOn September 11, 2007, the District Court issued a ~~private~~partial ~~placement~~ruling toon ~~six~~the ~~institutional~~PBGC’s motion for summary judgment. In its opinion, the District Court ~~accredited~~agreed ~~investors~~with ~~under~~the anPBGC ~~exemption~~and ~~from~~IBC ~~registration~~as ~~pursuant~~to the requisite standard for its review, but declined to ~~Rule 506~~review the ofPBGC’s ~~Regulation~~August D8, 2006, determination until after it can decide whether the administrative record ~~promulgated~~filed by the ~~SEC~~PBGC is complete. ~~The~~We ~~convertible~~await ~~notes~~the District Court’s rulings on both the completeness of the administrative record and the PBGC’s August 8, 2006, determination.

25On February 16, 2007, the Bankruptcy Court approved the employment agreement of Craig D. Jung as our Chief Executive Officer and member of our Board of Directors. Under the terms of the employment agreement, Mr. Jung will receive pre-emergence cash awards upon the achievement of certain levels of Total Enterprise Value (as defined in the employment agreement) and a post-emergence equity award, all as provided in the employment agreement together with certain other payments and benefits. The post-emergence equity award will not be a liability of IBC in the event that a settlement of our liabilities subject to compromise and other matters would result in a change in control of the Company.

~~Table~~Effective April 25, 2007, the Bankruptcy Court approved the employment agreement of ~~Contents~~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).

~~were~~On ~~purchased by Highbridge International LLC~~November 2, ~~Isotope~~ ~~Limited~~2007, AGthe ~~Domestic~~Pacific ~~Convertibles~~Southwest ~~LP,~~Teamsters AGBakery ~~Offshore~~Drivers ~~Convertibles~~Council ~~LTD,~~filed ~~Shepherd~~a ~~Investments International,~~grievance ~~Ltd., and Stark Trading. Between~~ under the ~~dates~~southern ofCalifornia ~~September~~Teamsters’ 2collective ~~and~~bargaining ~~September 21,~~agreements. ~~2004,~~The ~~we received~~grievance ~~written~~alleges ~~correspondence from all of the purchasers of the convertible notes stating~~ that it ~~was~~IBC ~~their~~violated ~~position~~the ~~that~~agreements weby ~~had~~denying ~~made~~severance ~~certain~~pay ~~misrepresentations~~to inTeamster-represented ~~connection~~employees ~~with~~who ~~the~~worked under ~~sale of~~ the ~~notes.~~ Noagreements ~~legal~~and ~~action~~who ~~has~~IBC ~~been~~laid-off ~~filed~~when byIBC ~~any~~exited of the ~~purchasers~~southern ~~with~~California ~~regard~~bread ~~to their claims and we~~market. ~~will~~IBC’s ~~aggressively~~position ~~defend~~is ~~any~~that ~~such action in~~ the ~~event~~agreements itdo isnot ~~filed.~~provide ~~On December 6, 2004, U.S. Bank~~for ~~National~~severance ~~Association,~~pay asand ~~indenture~~severance ~~trustee,~~related ~~filed~~benefit ~~proofs~~costs offor ~~claim~~employees in ~~our bankruptcy case on behalf~~the ofparticular ~~the noteholders in the amount of $100~~circumstances.~~7 million,~~ ~~plus~~The ~~any~~Teamsters ~~other~~have ~~amounts~~submitted ~~owing~~the ~~pursuant~~dispute to the ~~terms~~ ofarbitration ~~the~~procedure under ~~indenture and reimbursement of~~ the ~~trustee’s fees and expenses~~agreements. InIBC ~~addition,~~will ondefend ~~March 18,~~its ~~2005,~~position R2by ~~Investments,~~presenting ~~LDC~~its ~~filed~~full aevidence ~~proof~~and ~~of claim in the amount of $70.4 million plus interest,~~arguments ~~fees~~to ~~and expenses based on its holdings of 70% of~~ the ~~notes~~arbitrator.

OnDuring ~~July 9,~~the ~~2004,~~second wequarter ~~received~~of ~~notice~~fiscal of2008, anwe ~~informal~~incurred ~~inquiry~~debt ~~from~~fees ~~the~~of ~~SEC~~$0.6 million ~~This~~for ~~request followed~~ the October ~~voluntary~~1, ~~disclosures~~2007 ~~that~~amendment ~~we made~~ to ~~the SEC regarding the increase in~~ our ~~reserve~~DIP ~~for~~Facility ~~workers’ compensation~~and ~~during fiscal 2004 with~~ a ~~charge~~fee ~~to pre-tax income~~ of ~~approximately~~ $485.0 million. ~~We cooperated~~to ~~with~~secure ~~the SEC in its inquiry by providing documents and other information. On January 18, 2005, we announced that the SEC had issued~~ an ~~Order~~exit ~~commencing a formal investigation of the~~facility ~~Company~~commitment for ~~the~~financing ~~time~~to ~~period~~exit ~~June~~our Chapter ~~2002~~11 ~~through the present~~proceedings. ~~The~~These ~~Formal~~fees ~~Order~~are ~~indicated~~included ~~that~~in ~~the SEC~~other ~~staff~~assets ~~had~~in ~~reported information tending to show possible violations of Section 10(b), 13(a) and 13(b)(2) of~~ the ~~Exchange Act and Rules~~November ~~10b-5~~17, ~~12b-20,~~2007 ~~13a-1,~~balance ~~13a-13, 13a-14, 13b2-1 and 13b2-2~~sheet. The ~~specific~~ ~~allegations~~exit ~~pertaining~~financing toagreement ~~these~~stipulates ~~subsections included~~ that ~~IBC~~under certain ~~may have~~conditions, inincluding ~~connection with~~ the ~~purchase~~acceptance orby ~~sale~~the ofBankruptcy ~~securities,~~Court ~~made untrue statements~~ of ~~material~~an ~~fact~~alternative ~~or omitted material~~financing ~~facts~~agreement, orwe ~~engaged~~may inowe ~~acts~~up ~~which operated as a fraud or deceit upon purchasers of our securities; failed~~ to ~~file~~$12.0 million ~~accurate~~in ~~annual~~breakup ~~and~~fees. ~~quarterly reports;~~Additionally, ~~failed~~certain toactions ~~add~~by ~~material information to make any filed reports not misleading; failed to~~the ~~make~~Bankruptcy ~~and~~Court ~~keep~~concerning ~~accurate~~our ~~books~~emergence ~~and~~could ~~records~~result ~~and~~in ~~maintain~~the ~~adequate~~impairment ~~internal~~of ~~controls;~~the ~~and falsified~~$5.0 million ~~books~~commitment ~~or records~~fee.

~~Pursuant~~Except toas ~~the~~noted ~~Formal Order~~above, the ~~SEC~~Company ~~subpoenaed~~has ~~documents~~not ~~and~~determined ~~testimony~~a ~~from~~loss ~~several~~is ~~current~~probable, or ~~former~~ ~~officers~~a ~~and~~liability ~~directors~~has ~~and individuals from third party professional firms providing~~been ~~services to us. We cooperated fully with the SEC’s investigation. On November 2~~incurred, ~~2006,~~and wecannot ~~announced that,~~estimate ~~without~~a ~~admitting~~range ~~or denying the allegations by the SEC, we had submitted an offer~~ of ~~settlement~~ toloss ~~the~~or ~~staff~~amount of ~~the~~liability ~~Division~~for ~~of Enforcement of~~ the ~~SEC~~items ~~in connection with the~~disclosed ~~investigation,~~herein; ~~which was subject to approval by the Commission. On December 21~~however, ~~2006,~~ the ~~Commission~~ ~~approved~~ultimate ~~our~~resolutions ~~settlement~~could ~~offer~~have ~~and entered~~ a ~~cease~~material ~~and~~impact ~~desist~~on ~~order~~our ~~against future~~condensed ~~violations~~consolidated offinancial ~~the record-keeping, internal controls and reporting provisions of the federal securities laws and related SEC rules~~statements. ~~No fine was imposed.~~

~~After~~We ~~the~~are ~~commencement~~subject ofto ~~our~~various ~~Chapter 11~~other ~~cases,~~routine ~~the~~legal ~~NYSE~~proceedings, ~~notified~~environmental usactions ~~that~~and ~~its~~matters ~~Market Trading Analysis Department was reviewing transactions~~ in the ordinary ~~common~~course ~~stock~~ of ~~IBC occurring prior to our August 30~~business, ~~2004~~some ~~announcement that we were delaying the filing~~ of ~~our~~which ~~Form~~may ~~10-K~~be ~~and~~covered ~~prior~~in towhole ~~our September 22,~~or ~~2004~~in ~~filing~~part ofby ~~a petition for relief under Chapter 11~~insurance. ~~In connection with its~~Except ~~investigation,~~for the ~~NYSE~~matters ~~requested~~disclosed ~~information from us on various dates~~herein, ~~including September 22 and October 5, 2004, and February 2, 2005. We believe that~~ we ~~have~~are ~~fully~~not ~~responded~~aware ~~to each~~ of ~~the NYSE’s~~any ~~requests~~other ~~for~~items ~~information,~~as ~~with~~of ~~our~~this ~~last~~filing ~~response~~which ~~to the NYSE dated June 10, 2005, and we~~could ~~expect~~have toa ~~continue~~material toadverse ~~cooperate~~effect ~~with~~on ~~the~~our ~~NYSE~~condensed ifconsolidated itfinancial ~~requires any further information or assistance from us in connection with its inquiry~~statements.

~~In 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~~17. InEarnings ~~the case, which is captioned Miller v. Coffey, et al., No. 03-CV-216141~~ (~~Cir. Ct., Jackson Cty.~~Loss)~~, plaintiffs~~ ~~allege~~per ~~that the defendants in this action breached their fiduciary duties to IBC by~~Share 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 October 8, 2004, the court entered an order extending the stay for an additional 60 days. It is our position that, as a result of our Chapter 11 filing, the case has been automatically stayed under the Bankruptcy Code.

WeBasic and diluted earnings per share are ~~named~~calculated in ~~two~~accordance ~~wage~~with ~~and~~SFAS ~~hour~~No. 128, ~~cases~~Earnings inper Share. ~~New~~Basic ~~Jersey~~earnings ~~that~~per ~~have~~common ~~been~~share ~~brought~~is ~~under~~computed ~~state~~by ~~law~~dividing net income (loss) by the weighted average number of common shares outstanding during the period. 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, ~~one~~primarily stock options outstanding under our stock compensation plan and the impact of ~~which~~our ~~has~~6% senior subordinated convertible notes.

2629

~~Table~~The offollowing ~~Contents~~is the basic and diluted weighted average shares outstanding used in our earnings per share computations:

been brought on behalf of a putative class of RSRs. 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, et al. 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.

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

WeDiluted ~~are~~weighted ~~named~~average incommon anshares ~~additional~~outstanding ~~wage~~exclude ~~and~~options ~~hour~~on ~~case~~common ~~brought~~stock, onunvested restricted ~~behalf~~stock ofand adeferred ~~putative~~shares ~~class~~awarded, ofand ~~bakery production~~our ~~supervisors~~6% ~~under~~senior ~~federal~~subordinated ~~law~~convertible notes, which ~~captioned~~aggregated ~~Anugweje~~to vapproximately 12.9 million ~~Interstate~~and ~~Brands Corp~~13.,8 million ~~2:03~~for CVthe second quarter of fiscal ~~00385~~2008 ~~(WGB)~~and (D2007, respectively, and approximately 13.N0 million and 14.~~J.).~~0 million ~~This~~for ~~action~~year-to-date fiscal is2008 inand ~~the~~2007, ~~preliminary~~respectively, ~~stages.~~because Astheir aeffect ~~result~~would ofhave ~~our~~been ~~Chapter 11~~antidilutive. Due to our ~~filing~~reported net losses for all periods, ~~this~~diluted ~~case~~loss ~~has~~per ~~been~~share ~~automatically~~amounts ~~stayed.~~are Wenot ~~intend~~adjusted tofor ~~vigorously~~the ~~contest~~effect of ~~this~~dilutive ~~litigation~~stock awards.

~~The~~Under ~~EPA~~an ~~has made inquiries into the refrigerant handling practices of companies in our industry. In September~~August ~~2000~~12, we2004 ~~received~~amendment ~~a request for information from the EPA relating~~ to our ~~handling~~Senior ~~of regulated~~Secured ~~refrigerants~~Credit Facility, ~~which~~ we ~~historically~~are ~~have~~prohibited ~~used in equipment in our bakeries for a number~~from ofpaying ~~purposes,~~dividends ~~including~~until ~~to cool the dough during the production process. The EPA has entered into negotiated settlements with two companies in~~ our ~~industry,~~senior ~~and~~secured ~~has~~bank ~~offered~~debt ais ~~partnership~~rated ~~program~~at ~~to other~~least ~~members of the bakery industry that offered amnesty from fines if participating companies converted their equipment to eliminate the use of ozone~~BB-~~depleting~~ ~~substances.~~by ~~Because~~Standard we& ~~had~~Poor’s ~~previously~~Ratings ~~received~~Services anand ~~information~~Ba3 ~~request~~by ~~from~~Moody’s ~~the~~Investors ~~EPA~~Service, ~~the EPA/Department of Justice (DOJ) policies indicated that we were not eligible to participate~~ in ~~the~~each ~~partnership~~case ~~program. Nevertheless,~~with wea ~~undertook~~stable ~~our~~outlook ~~own voluntary program to convert our industrial equipment to reduce~~or ~~the use of ozone-depleting refrigerants~~better. ~~Prior~~In ~~to our Chapter 11 filing~~addition, weduring ~~had undertaken negotiations with~~ the ~~EPA~~term ~~to resolve issues that may exist regarding our historic management~~ of ~~regulated~~ ~~refrigerants. The DOJ, on behalf of~~ the ~~United~~DIP ~~States of America~~Facility, ~~filed a proof of claim in our bankruptcy case on March 21, 2005 based upon our refrigerant handling practices. Although~~ the ~~proof~~payment of ~~claim~~dividends ~~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~~prohibited. ~~We are engaged in settlement discussions with the EPA/DOJ. If~~ ~~these discussions are unsuccessful, we intend to vigorously challenge any penalties calculated on this basis and defend against such claims by the EPA/DOJ.~~

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 Permit18. ~~Among~~Comprehensive ~~other things, that permit requires that the operating temperatures of the~~Loss 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 of Violation alleges we were in violation of the permit through 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 received 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. Management is committed to cooperating with the SCAQMD and is taking actions necessary to minimize or eliminate any future violations and negotiate a reasonable settlement of those that have been alleged.

InReconciliations ~~December, 2004, we began a review with respect to the proper accounting treatment for the American Bakers Association Retirement Plan, or ABA Plan, in light~~ of ~~newly~~net ~~identified~~loss ~~information. Prior~~ to ~~our~~comprehensive ~~recent~~loss ~~restructuring~~are ~~efforts, approximately 900 active IBC employees participated under the pension plan, although the number of active employees has significantly decreased~~ as afollows: result of the restructuring to approximately 350 active employees in the ABA Plan as of September 30, 2006. We had previously accounted for the ABA Plan as a multi-employer plan, which resulted in recognition of expense in the amount of our actual contributions to the ABA Plan but did not require recognition of any service cost or interest cost or for the Company to record any minimum pension benefit obligation on our balance sheet.

Upon review, the Company has determined that the ABA Plan is a type of pension plan that requires recognition of service cost and interest cost. Additionally, we have concluded our balance sheet should also reflect the appropriate pension benefit obligation. We believe that the ABA Plan has been historically administered as a multiple employer


	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	)

2719. Segment Information

~~Table~~SFAS No. 131, Disclosures about Segments of ~~Contents~~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.

~~plan under ERISA and tax rules and should be~~30 treated as such. However, the amounts reflected in our financial statements after the fiscal 2004 financial statement restatement 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 Pension Benefit Guaranty Corporation (PBGC) (as discussed below). As of March 10, 2007, we have recorded a net pension benefit obligation liability of approximately $61.7 million with respect to our respective interest in the ABA Plan, reflecting its characterization as an aggregate of single employer plans.

AsWe ainitiated ~~result~~changes ofin aour ~~request~~reporting ~~made~~system byeffective usfor ~~and~~ the ~~Kettering~~beginning ~~Baking~~of ~~Company~~fiscal 2008, ~~another participating~~which ~~employer~~resulted in the ~~ABA~~identification ~~Plan,~~of ~~the~~three ~~PBGC,~~distinct ~~which~~reportable issegments. ~~the~~The ~~federal~~three ~~governmental agency that insures and~~reportable ~~supervises~~segments ~~defined~~were ~~benefit~~determined ~~pension~~by ~~plans,~~type ~~revisited~~of ~~its~~customer ~~1979~~and ~~determination~~distribution ~~that~~method. ~~the~~Management ~~Plan~~continues ~~was an~~to ~~aggregate~~maintain ofthe ~~single~~wholesale ~~employer~~operations ~~plans~~ and ~~after~~retail ~~reviewing~~operations ~~the~~as ~~status~~reporting ofsegments, ~~the~~but ~~ABA~~renamed ~~Plan,~~them ~~on August 8,~~as ~~2006,~~route ~~made~~sales ~~a final determination that the ABA Plan is a multiple employer plan under ERISA~~ and ~~tax rules.~~outlet ~~On August 9~~sales, ~~2006,~~respectively. weThe ~~filed~~third areporting ~~lawsuit~~segment, indirect ~~Bankruptcy~~sales, ~~Court seeking enforcement of the PBGC’s~~was ~~determination,~~established ~~but~~by ~~there~~segregating ~~can~~certain beoperations nopreviously ~~assurance~~within aswholesale tooperations ~~whether~~that ~~we will obtain such enforcement or the~~deliver ~~amount~~products ofexclusively ~~any~~through ~~reduction~~warehouse ~~to our net benefit obligation liability~~channels. ~~Accordingly,~~Our ~~due~~reportable tosegments ~~the~~are ~~lack~~strategic ~~of a~~business ~~definitive~~units ~~resolution~~that ofare ~~this~~managed ~~uncertainty~~separately ~~prior~~using todifferent ~~the~~distribution ~~end~~and ofmarketing ~~the~~strategies. ~~fiscal periods presented herein,~~Prior asyear’s ~~noted~~amounts ~~above we~~ have ~~continued~~been revised to reflect ~~our interests in~~ the ~~ABA~~current ~~Plan~~fiscal asyear’s ansegment ~~aggregate of single~~reporting ~~employer plans~~presentation.

InRoute ~~our~~sales ~~December 2005~~(formerly ~~submission~~wholesale ~~requested~~operations) by— ~~the~~Our ~~PBGC~~route insales ~~connection~~accounted ~~with~~for ~~its~~approximately ~~review~~86.1% ~~of the 1979~~and ~~determination~~86.6% ~~referred~~of ~~to above, we asserted~~ our ~~belief~~net ~~based~~sales onfor ~~available information that treatment of~~ the ~~ABA~~twelve ~~Plan~~weeks asended aand ~~multiple~~86.5% ~~employer~~and ~~plan~~86.9% ~~will~~for ~~result~~the intwenty-four anweeks ended ~~allocation~~November 17, of2007 ~~pension~~and ~~plan assets~~November 18, to2006, ~~our~~respectively, ~~pension~~and ~~plan~~consists ~~participants~~of in an ~~amount~~aggregation ~~equal to approximately $40 million. We believe that treatment~~ of ~~the ABA Plan as a multiple employer plan will result in a significant reduction~~our inoperations ~~our net pension benefit obligation with respect to our employee participants from~~ that ~~which~~manufacture, ~~is reflected~~distribute, inand ~~Note~~sell ~~11.~~fresh ~~Employee~~baked ~~Benefit~~goods ~~Plans.~~utilizing ~~The~~our ~~ultimate~~direct ~~outcome of this uncertainty cannot~~store ~~presently~~delivery ~~be determined~~system.

InOutlet ~~addition,~~sales we(formerly ~~have~~retail ~~received~~operations) ~~requests~~— ~~for~~Our ~~additional~~outlet ~~corrective~~sales ~~contributions~~generated ~~assessed~~approximately ~~after May 28, 2005, under the single employer plan assumption, which we do not believe is correct~~10.6% ~~We have~~and ~~not made such contributions pending the resolution of the uncertainties surrounding the ABA Plan~~11. ~~However,~~3% ~~we expect that the amount~~ of ~~such~~our ~~contributions~~net ~~would~~sales befor ~~significantly less than amounts assessed by~~ the ~~ABA~~twelve ~~Plan~~weeks onended ~~the~~and ~~assumption that the plan was an aggregate of single employer plans~~10. On7% ~~May 3, 2006, Sara Lee Corporation instituted proceedings against the ABA Plan~~ and ~~the~~11.4% ~~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~~twenty-~~cv-00819-HHK~~four ~~(D.D.C.) (the “Sara Lee Litigation”). The relief Sara Lee seeks includes, among~~weeks ~~other~~ended ~~things~~November 17, a2007 ~~mandatory injunction that would compel the ABA Plan~~ and ~~the Board of Trustees to (i)~~November 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 balances18, ~~to the extent such employers did not maintain a positive balance. However~~2006, ~~the Sara Lee Litigation is premised on the notion that the ABA Plan is an aggregate of single employer plans~~respectively, 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~~consists ~~the PBGC’s August 8, 2006 determination. In order to obtain a resolution~~ of ~~these~~five ~~matters~~regions ~~without~~that ~~litigation~~sell ~~over the proper forum, we have voluntarily stayed~~ our ~~lawsuit~~baked ingoods ~~Bankruptcy Court seeking enforcement of the August 8, 2006 determination upon the agreement by the ABA Plan~~ and ~~its~~other ~~Board~~food ~~of Trustees~~items todirectly ~~join IBC as a party~~ to ~~the~~consumers ~~Sara~~through ~~Lee~~company-operated ~~Litigation~~outlet locations.

OnDirect ~~December 4,~~sales ~~2006,~~— ~~the~~Our ~~ABA~~direct ~~Plan~~sales ~~and~~generated ~~the~~approximately ~~Board~~3.3% ofand ~~Trustees~~2.1% ~~served~~of aour ~~summons~~net ~~upon~~sales usfor ~~as a third~~the ~~party~~twelve ~~defendant~~weeks toended aand ~~Third~~2.8% ~~Party~~and ~~Complaint~~1.7% ~~filed~~for in the ~~Sara~~twenty-four ~~Lee~~week ~~Litigation~~s ~~against~~ended ~~Sara~~November 17, ~~Lee~~2007 and ~~the~~November 18, ~~other~~2006, ~~participating~~respectively, ~~employers~~and inconsists ~~the~~of ~~ABA~~our ~~Plan.~~direct ~~The~~warehouse ~~Third~~shipment ~~Party~~program, ~~Complaint~~which ~~seeks a declaratory~~ships ~~judgment~~bulk aspackaged tosweet ~~the~~goods ~~nature of the ABA Plan~~ and ~~further~~dry ~~asserts that the August 8~~products, ~~2006~~such ~~determination was~~as ~~arbitrary~~croutons and ~~capricious~~stuffing ~~and should be rescinded. At this time~~mix, wedirectly ~~believe all relevant parties~~to ~~have~~customer-owned ~~been~~distribution ~~joined~~centers ~~to the Sara Lee Litigation~~ and ~~the~~public ~~District~~warehouses ~~Court~~ for ~~the District of Columbia will review the PBGC’s administrative determination~~distribution.

OnOur ~~November 22~~management evaluates reportable segment performance based on profit or loss from operations before other income, ~~2006~~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 ~~ABA~~related ~~Plan~~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 ~~Board~~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 ~~Trustees~~products ~~filed~~at acost ~~motion~~from inroute sales to direct sales aggregated approximately $11.6 million and $7.6 million for the ~~bankruptcy~~twelve ~~court~~weeks ended and $22.4 million and $15.7 million for the ~~seeking~~twenty-four anweeks ended November 17, 2007 and November 18, 2006, respectively.

28The measurement of reportable segment results is generally consistent with the presentation of the consolidated statement of operations.


	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

~~order requiring IBC to file an application with the Internal Revenue Service requesting~~31 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. At a status conference held on April 5, 2007, the court scheduled oral argument on the PBGC’s motion for July 2, 2007.

On October 30, 2006, Brencourt Advisors, LLC, a stockholder of the Company, filed a complaint in the Court of Chancery of the State of Delaware for New Castle County, captioned Brencourt Advisors LLC v. Interstate Bakeries Corporation, C.A. No. 2506-N (the “Complaint”) seeking to compel an annual meeting of stockholders for the purpose of electing directors. On November 29, 2006, we filed a motion with the Bankruptcy Court in response to the Complaint seeking (i) to have the Bankruptcy Court confirm our Board of Directors to be the nine individuals currently serving as members of our Board of Directors and (ii) an injunction from the Bankruptcy Court ordering Brencourt to cease the prosecution of the Complaint. On January 5, 2007, the Bankruptcy Court approved a settlement among the Company and its various constituency groups to reconstitute our Board of Directors from nine to seven members. Pursuant to the terms of the settlement, five directors left the Board, two new directors were appointed by the Bankruptcy Court and the remaining Board seat was filled by our new Chief Executive Officer on February 16, 2007. On January 11, 2007, the Complaint was dismissed without prejudice.


	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 February 16, 2007, the Bankruptcy Court approved the Employment Agreement of Craig D. Jung as our Chief Executive Officer and member of our Board of Directors. Under the terms of the Employment Agreement, Mr. Jung will receive pre-emergence cash awards upon the achievement of certain levels of Total Enterprise Value (as defined in the Employment Agreement) and a post-emergence equity award, all as provided in the Employment Agreement.


(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.

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

WeSubsequent ~~are~~to ~~subject~~the toquarter-end, ~~various~~we ~~other~~entered ~~routine~~into ~~legal~~the ~~proceedings,~~following ~~environmental~~amendments ~~actions~~to ~~and~~the ~~matters~~DIP inFacility. ~~the~~The ~~ordinary~~second ~~course~~amendment, ofdated ~~business~~November 29, ~~some~~2007, changed the date for delivery of ~~which~~a ~~may~~revised beplan detailing ~~covered~~the inBorrower’s ~~whole~~proposed orstrategy infor ~~part~~maximizing bythe ~~insurance~~value of the bankruptcy estates. ~~Except~~If ~~for~~on ~~the~~or ~~matters~~before ~~disclosed~~January 29, ~~herein~~2008, weIBC ~~are~~has not ~~aware~~reached an agreement in principle with our two largest union groups and Silver Point Finance L.L.C. (or an approved provider of ~~any~~alternate ~~other~~exit ~~items~~financing, if asapplicable) has not announced its support of ~~this~~the ~~filing~~labor ~~which~~agreements, ~~could~~then, the lenders may request ~~have~~in writing a ~~material~~plan ~~adverse~~to ~~effect~~be ondelivered ~~our~~within ~~condensed~~twenty-one ~~consolidated~~days ~~financial~~of ~~statements~~receipt of the written request.

18Our 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) $80.0 million ~~Earnings~~or (~~Loss~~b) 40% ~~per~~of ~~Share~~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.

~~Basic~~In ~~and~~connection ~~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 ~~weighted average~~execution ~~number~~ of ~~common shares outstanding during~~ the ~~period.~~third 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 sharesamendment, ~~primarily~~we ~~stock~~incurred ~~options~~debt ~~outstanding~~fees ~~under our stock compensation plan and the impact~~ of ~~our 6% senior subordinated convertible notes~~$0.5 million.

~~The following is the reconciliation between basic and diluted weighted average shares outstanding~~32 ~~used in our earnings per share computations:~~

	Sixteen Weeks Ended				Forty Weeks Ended
	March 10,		March 4,		March 10,		March 4,
	2007		2006		2007		2006
	(in thousands)
Weighted average common shares outstanding:
Basic and diluted		45,169		45,129		45,167		45,111

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

29This 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.

~~Table~~COMPANY ~~of Contents~~OVERVIEW

~~Diluted~~Interstate ~~weighted~~Bakeries ~~average~~Corporation ~~common~~is ~~shares~~one ~~outstanding~~of ~~exclude~~the ~~options~~largest onwholesale ~~common~~bakers ~~stock,~~and ~~unvested~~distributors of fresh ~~restricted~~baked ~~stock~~bread and ~~deferred~~sweet ~~shares~~goods ~~awarded~~in the United States, producing, marketing, distributing and ~~our~~selling 6%a wide ~~senior~~range ~~subordinated~~of ~~convertible~~breads, ~~notes~~rolls, ~~which~~ ~~aggregated~~croutons, tosnack ~~approximately~~cakes, ~~13.6 million~~donuts, sweet rolls and 14related products.~~4 million~~ ~~for~~Our various ~~the~~brands ~~third~~are ~~quarter~~positioned ofacross ~~fiscal 2007~~a ~~and~~wide ~~2006,~~spectrum ~~respectively,~~of ~~and~~consumer ~~approximately~~categories ~~13.8 million~~ and 14price points.~~5 million~~ ~~for year-to-date~~We ~~fiscal~~currently ~~2007~~operate ~~and~~42 ~~2006,~~bakeries ~~respectively,~~and ~~because~~approximately ~~their~~750 ~~effect~~bakery ~~would~~outlets ~~have~~located ~~been~~in ~~antidilutive.~~strategic ~~Due to our~~markets ~~reported~~throughout ~~net~~the ~~losses~~United ~~for~~States. ~~all~~Our ~~periods,~~sales ~~diluted~~force ~~loss~~delivers ~~per~~baked ~~share~~goods ~~amounts~~from ~~are~~approximately ~~not~~600 distribution ~~adjusted~~centers ~~for~~on ~~the~~over ~~effect of~~6,100 ~~dilutive~~delivery ~~stock awards~~routes.

~~Under~~RECENT ~~an August 12, 2004 amendment to our Senior Secured Credit Facility, we are prohibited from~~DEVELOPMENTS 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.

19In early October 2007, we embarked on the process of formulating a rational strategy for maximizing value of the bankruptcy estates. ~~Comprehensive~~We ~~Loss~~continue to face substantial uncertainty 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 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.

~~Reconciliations~~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 ~~net~~approximately ~~loss~~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 ~~comprehensive~~our ~~loss~~collective ~~are~~bargaining asagreements ~~follows:~~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.

	Sixteen Weeks Ended						Forty Weeks Ended
	March 10,			March 4,			March 10,			March 4,
	2007			2006			2007			2006
	(dollars in thousands)
Net loss	$	(42,235	)	$	(42,634	)	$	(94,851	)	$	(102,946	)
Other comprehensive income (loss):
Commodity derivative (gains) losses reclassified to cost of products sold, net of income taxes of $0		—			—			—			(477	)
Comprehensive loss	$	(42,235	)	$	(42,634	)	$	(94,851	)	$	(103,423	)

We have established bidding procedures, which have been approved by the Bankruptcy Court, to govern the process for soliciting alternative investment proposals. Under the procedures, indications of 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.

~~20.~~CRITICAL ~~Segment~~ACCOUNTING ~~Information~~POLICIES

~~SFAS~~Refer ~~No. 131,~~to ~~Disclosures~~Critical ~~about~~Accounting ~~Segments~~Policies ofin anour ~~Enterprise~~2007 ~~and~~Annual ~~Related~~Report ~~Information,~~on ~~requires~~Form us10-K ~~to report~~for information ~~about~~on accounting ~~our~~policies ~~operating~~that ~~segments~~we ~~according~~consider tocritical ~~management’s~~in ~~approach~~preparing ~~for~~our ~~determining reportable~~consolidated ~~segments~~financial statements. These ~~This~~policies ~~approach~~include issignificant ~~based~~estimates onmade ~~the~~by ~~way~~ management ~~organizes~~using ~~segments~~information ~~within~~available aat the ~~company~~time ~~for~~the ~~making~~estimates ~~operating~~were ~~decisions~~made. ~~and~~However, ~~assessing~~these ~~performance~~estimates could change materially if different information or assumptions were used.

~~We have aggregated our identified operating segments into two distinct reportable segments by~~33 ~~production process, type of customer, and distribution method as follows:~~

~~Wholesale~~RESULTS ~~operations~~OF ~~— Our wholesale operations accounted for approximately 89.2% and 88.5% of our~~OPERATIONS net sales for the sixteen weeks ended and 88.8% and 88.3% for the forty weeks ended March 10, 2007 and March 4, 2006, respectively, and consists of an aggregation of our ten profit centers that manufacture, distribute, and sell fresh baked goods.

~~Retail~~The ~~operations~~following —table ~~Our~~sets ~~retail~~forth ~~operations generated approximately 10.8% and 11.5% of our net sales for~~ the ~~sixteen~~relative ~~weeks~~percentages ~~ended~~that ~~and~~certain ~~11.2%~~income and ~~11.7%~~expense ~~for~~items ~~the forty weeks ended March 10, 2007 and March~~bear 4,to ~~2006,~~net ~~respectively, and consists of five regions that sell our baked goods and other food items.~~sales:

Our reportable segments are strategic business units that are managed separately using different marketing strategies.


	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	)%

30Net Sales

~~Table~~(dollars ofin ~~Contents~~thousands)

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 both reportable segments and must be allocated between segments. Additionally, we do not identify or allocate fixed assets 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 aggregated approximately $30.4 million and $33.4 million for the sixteen weeks ended and $83.9 million and $91.4 million for the forty weeks ended March 10, 2007 and March 4, 2006, respectively.


	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	)%

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

	Sixteen Weeks Ended						Forty Weeks Ended
	March 10,			March 4,			March 10,			March 4,
	2007			2006			2007			2006
	(dollars in thousands)
Net Sales
Wholesale operations	$	768,577		$	774,564		$	1,969,859		$	2,049,747
Retail operations		93,064			100,245			247,940			272,092
Total net sales	$	861,641		$	874,809		$	2,217,799		$	2,321,839
Operating Income (Loss)
Wholesale operations	$	4,393		$	(28,589	)	$	19,183		$	(19,048	)
Retail operations		1,556			(199	)		6,555			6,883
		5,949			(28,788	)		25,738			(12,165	)
Corporate		(25,615	)		8,929			(59,914	)		(40,118	)
Total operating loss		(19,666	)		(19,859	)		(34,176	)		(52,283	)
Interest expense		14,673			16,529			38,831			39,020
Reorganization charges		9,980			10,255			26,687			28,402
Other (income) expense		(44	)		(82	)		(1,120	)		(2,917	)
		24,609			26,702			64,398			64,505
Loss before income taxes		(44,275	)		(46,561	)		(98,574	)		(116,788	)
Provision (benefit) for income taxes		(2,040	)		(3,927	)		(3,723	)		(13,842	)
Net loss	$	(42,235	)	$	(42,634	)	$	(94,851	)	$	(102,946	)

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.

~~21.~~Our ~~Subsequent~~route ~~Events~~sales, formerly wholesale operations, consist of an aggregation of our operations that manufacture, distribute, and sell fresh baked goods utilizing our direct store delivery system.

OnOur ~~March 14,~~outlet ~~2007~~sales, ~~the~~formerly ~~Bankruptcy~~retail ~~Court approved the fiscal 2007 IBC Management Incentive Plan~~operations, ~~or the~~consist ~~Plan,~~of ~~for~~five ~~key~~regions ~~employees.~~that ~~Payments~~sell ~~under~~our ~~the~~baked ~~Plan~~goods ~~are to be based upon our financial~~and ~~performance~~other ~~during~~food ~~fiscal~~items ~~2007.~~directly ~~Any~~to ~~compensation~~consumers ~~expense~~through ~~due~~company-operated ~~under~~outlet ~~the Plan will be accrued in the fourth quarter of fiscal 2007~~locations.

31Our 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.

~~Table of Contents~~34

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

~~This~~Net ~~discussion~~sales ~~should~~for bethe ~~read~~second inquarter ~~conjunction~~of ~~with~~fiscal ~~our consolidated financial statements~~2008, ~~notes,~~ ~~and~~the ~~tables~~twelve ~~included~~weeks ~~elsewhere~~ended ~~in this report~~November 17, ~~as well as~~2007, ~~the more detailed Management’s~~were ~~Discussion~~approximately ~~and~~$645.1 million, ~~Analysis~~a ofdecrease ~~Financial Condition and Results~~ of ~~Operations~~approximately $26.8 million, or ~~MD&A~~4.0%, ~~contained~~from innet ~~our~~sales of ~~2006~~approximately ~~Annual Report on Form 10-K~~$671.9 million ~~This~~in ~~MD&A~~the ~~may~~same ~~contain~~period ~~forward-looking~~in ~~statements~~fiscal ~~that~~2007. ~~are provided~~ Year-to-date ~~assist~~net insales ~~the~~for ~~understanding~~fiscal 2008 ofdecreased ~~anticipated~~approximately ~~future~~$21.3 million, ~~financial~~or ~~performance~~1. ~~However~~6%, ~~future~~ ~~performance~~to ~~involves~~approximately ~~risks and uncertainties~~$1,334.9 million, ~~which~~from ~~may cause actual results to differ~~net ~~materially~~sales ~~from~~of ~~those~~approximately ~~expressed~~$1,356.2 million infor the ~~forward-looking~~same ~~statements.~~period ~~See~~in ~~Forward-Looking~~fiscal ~~Statements for further information~~2007.

~~COMPANY~~Route ~~OVERVIEW~~net sales. Route net sales for the second quarter of fiscal 2008 were approximately $555.3 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.

~~Interstate~~Outlet ~~Bakeries~~net ~~Corporation~~sales. isOutlet ~~one~~net ofsales for the ~~largest~~second ~~wholesale~~quarter ~~bakers~~of ~~and~~fiscal ~~distributors~~2008 were approximately $68.2 million, a decrease of ~~fresh~~approximately $7.5 million, or 9.8%, from net sales of approximately $75.7 ~~baked~~million ~~bread~~when ~~and~~compared ~~sweet~~to ~~goods~~the same period in ~~the~~fiscal ~~United~~2007. ~~States,~~Year-to-date ~~producing,~~outlet ~~marketing~~net sales for fiscal 2008 decreased approximately $12.6 million or 8.1%, ~~distributing~~to ~~and~~approximately ~~selling~~$142.3 million ~~a wide~~from ~~range~~outlet net sales of ~~breads,~~approximately ~~rolls,~~$154.9 million ~~croutons,~~when ~~snack~~compared ~~cakes,~~to ~~donuts,~~the ~~sweet~~same ~~rolls~~period ~~and~~in ~~related~~fiscal ~~products~~2007. ~~Our~~The decline ~~various~~in ~~brands~~revenue ~~are~~for ~~positioned~~both ~~across~~periods ais ~~wide~~attributable ~~spectrum~~to ofthe ~~consumer~~closing ~~categories~~of ~~and~~retail ~~price~~outlets ~~points.~~in Weconjunction with ~~operate~~our 45restructuring ~~bakeries~~efforts and ~~approximately~~a ~~800~~decrease ~~bakery~~in ~~outlets~~same ~~located~~store insales ~~strategic~~related ~~markets~~to ~~throughout~~ the ~~United~~effects ~~States.~~of ~~Our~~retail ~~sales~~price increases ~~force~~for ~~delivers~~the ~~baked~~second ~~goods~~quarter ~~from~~and ~~approximately~~year-to-date ~~700~~of ~~distribution~~2.3% ~~centers~~and 1.3%, respectively when compared to onthe ~~approximately~~same ~~6,500~~periods ~~delivery~~of ~~routes~~the prior year.

~~RECENT~~Direct ~~DEVELOPMENTS~~net sales. Direct net sales for the second quarter of fiscal 2008 were approximately $21.6 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.

OnGross ~~January 5,~~Profit ~~2007,~~(exclusive ~~the Bankruptcy Court approved a settlement among the Company and its various constituency groups to reconstitute our Board~~ of ~~Directors~~depreciation ~~from nine to seven members. Pursuant to the terms of the settlement, David I. Pauker~~ and ~~Terry R. Peets joined the Board of Directors and five~~amortization) ~~other members of the Board of Directors departed. The settlement contemplated that the Company’s new Chief Executive Officer, when appointed, would fill the seventh seat on our Board of Directors.~~

OnGross ~~January 30,~~profit ~~2007,~~was ~~David~~approximately N$316.6 million, ~~Weinstein~~or ~~resigned~~49.1% asof anet ~~director~~sales, offor the ~~Company.~~second Onquarter ~~February 28,~~of ~~2007~~fiscal 2008, ~~our~~in ~~Board~~comparison ofwith ~~Directors~~approximately $324.4 million, ~~following~~or ~~the~~48.3% ~~recommendation~~ of ~~the~~net ~~Equity~~sales, ~~Committee~~for ~~organized~~the ~~in our~~same ~~Chapter 11~~period ~~proceedings~~in ~~and~~fiscal ~~the~~2007. ~~Nominating~~Year-to-date ~~and~~gross ~~Corporate~~profit ~~Governance~~was ~~Committee~~approximately of$663.2 million ~~our~~or ~~Board~~49.7% of net ~~Directors~~sales, ~~appointed~~in ~~Philip~~comparison A.with ~~Vachon~~approximately as$656.5 million aor ~~director~~48.4% toof ~~fill~~net ~~the~~sales, ~~vacancy~~for ~~left by~~ the ~~resignation~~same ofperiod Mrin fiscal 2007. ~~Weinstein.~~

OnTotal ~~February 16,~~gross ~~2007,~~margin for the ~~Bankruptcy~~second ~~Court~~quarter ~~approved~~of ~~the~~fiscal ~~employment~~2008 ~~agreement~~increased 0.8% of ~~Craig~~net D.sales ~~Jung~~compared asto the same period in fiscal 2007. We improved our ~~Chief~~margins ~~Executive~~by ~~Officer~~means of our strategic pricing structure, including price increases and improved route returns, ~~consistent~~which ~~with~~were partially offset by the effect ~~terms~~of unfavorable increases in direct component costs per pound of ~~the~~production. ~~settlement~~On ~~discussed~~a ~~above,~~cost per ~~appointed~~pound Mrbasis, direct component costs per pound increased approximately 8. ~~Jung~~2% aswhen compared to fiscal 2007. These direct component costs, when compared on a ~~member~~cost per pound of ~~our~~production ~~Board~~with offiscal 2007, ~~Directors.~~increased Mr4. ~~Jung~~9% ~~succeeds~~for ~~Antonio~~ingredients, C0.7% ~~Alvarez~~for IIpackaging, ~~who~~ ~~had~~and ~~served~~2.6% for labor. Overhead and administrative costs as ~~our~~a ~~interim~~percent ~~Chief~~of ~~Executive~~net ~~Officer~~sales ~~since~~remained ~~September 2004~~constant when compared to the same period in fiscal 2007.

~~Together with Mr. Pauker, Mr. Peets, Mr. Vachon and Mr. Jung, our Board of Directors also currently~~35 consists of Robert Calhoun, a Board member since 1991; Michael Anderson, a Board member since 1998; and William Mistretta, a Board member since 2006. Additionally, our Nominating and Corporate Governance Committee is comprised of Mr. Peets (Chair), Mr. Pauker, and Mr. Vachon; our Audit Committee is comprised of Mr. Calhoun (Chair), Mr. Anderson and Mr. Mistretta; and our Compensation Committee is comprised of Mr. Pauker (Chair), Mr. Calhoun and Mr. Peets.

Total year-to-date gross margin increased 1.3% of net sales when compared to the same period in fiscal 2007. We ~~are~~improved ~~reviewing~~our margins by means of our ~~restructuring~~strategic ~~alternatives~~pricing ~~consistent~~structure, ~~with~~including ~~the~~price increases ~~following~~and ~~four~~improved ~~priorities~~route ~~established~~returns, which were offset partially by Mrthe 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. ~~Jung~~On a cost per pound basis, ~~which~~direct hecomponent iscosts per ~~leading~~pound ~~management’s~~increased ~~efforts~~approximately 6.9% when compared to ~~address:~~fiscal ~~(1) fix~~2007. ~~our~~These direct component costs, when compared on a cost ~~structure~~per topound ~~grow~~of ~~margins;~~production ~~(2) accelerate~~with ~~innovation~~fiscal to2007, ~~realize~~increased ~~attractive~~4.0% ~~revenue~~for ~~growth;~~ingredients, ~~(3) drive~~0.6% ~~productivity~~for topackaging, ~~improve~~and ~~margins;~~2.3% for labor. Overhead and ~~(4) create~~administrative costs as a ~~performance~~percent ~~culture~~of net sales increased approximately 0.1% when compared to the same period in fiscal 2007.

~~Also on February 16~~Selling, ~~2007,~~Delivery ~~the~~and ~~Bankruptcy~~Administrative ~~Court approved an extension of the maturity date of IBC’s~~Expenses ~~post-petition debtor-in-possession (DIP) financing facility to February 9, 2008 from June 2, 2007.~~

Selling, delivery and administrative expenses were approximately $310.2 million, representing 48.0% Inof net sales, for the ~~third~~second quarter of fiscal ~~2007~~2008 down from approximately $318.7 million, weor 47.4% ~~introduced~~of ~~100~~net ~~Calorie~~sales, ~~Packs~~when oncompared awith ~~national~~the ~~basis~~same period in ~~the~~fiscal 2007. Year-to-date selling, ~~following~~delivery ~~three~~and ~~flavors:~~administrative ~~chocolate~~expenses ~~cake~~for ~~with~~fiscal ~~chocolate~~2008 ~~icing~~amounted to approximately $631.2 million, ~~yellow~~or 47.3% ~~cake~~of ~~with~~net ~~chocolate~~sales, ~~icing~~decreasing ~~and~~from approximately $641.4 million, or 47.3% of net sales, for the ~~carrot~~same ~~cake~~period ~~with~~in ~~cream~~the ~~cheese~~prior ~~icing~~year.

~~CRITICAL~~For ~~ACCOUNTING~~the ~~POLICIES~~second quarter of fiscal 2008, the increase in selling, delivery and administrative expenses as a percent of net sales was 0.6% when compared to the same period of the previous year. Our corporate administrative costs as 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 quarter of the prior year. These percentage increases reflect the effect of a slower rationalization of selling and delivery costs, including labor in the exit of the Southern California bread market as compared to the reduction in net sales. Additionally, energy, 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.

~~Refer~~On a year-to-date ~~Critical~~basis, ~~Accounting~~selling, ~~Policies~~delivery and administrative expenses as a percent of net sales were 47.3% for both fiscal 2008 and the same period in ~~our~~fiscal ~~2006~~2007. ~~Annual~~Our ~~Report~~labor onand ~~Form~~labor-related costs 10as a percent of net sales decreased 0.2% principally related to reduced labor expense from the closure of outlet locations and decreased over-Kthe-road ~~for~~transportation ~~information~~labor onresulting from ~~accounting~~reduced ~~policies~~volumes ~~that~~and wedistribution ~~consider~~efficiencies ~~critical~~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 ~~preparing~~routes, the related vehicle licensing, and real estate and other taxes associated with our ~~consolidated~~reduction ~~financial~~in ~~statements~~depots. Corporate ~~These~~administrative ~~policies~~costs ~~include~~as ~~significant~~a ~~estimates~~percent ~~made~~of bynet ~~management~~sales ~~using~~increased ~~information~~by ~~available~~0.2% atprincipally ~~the~~as a ~~time~~result ~~the~~of ~~estimates~~incentive ~~were~~accruals ~~made~~and increased professional and consultant fees. ~~However~~Additionally, facility ~~these~~and ~~estimates~~all ~~could~~other ~~change~~costs ~~materially~~combined ifeach ~~different information~~increased orby ~~assumptions~~0.1% ~~were~~as ~~used~~a percent of net sales.

32Restructuring Charges (Credits)

~~Table~~During the second quarter of ~~Contents~~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 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.

~~RESULTS~~The OFnet ~~OPERATIONS~~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.

~~The following table sets forth the relative percentages that certain income and expense items bear~~36 ~~to net sales:~~

	Sixteen Weeks Ended						Forty Weeks Ended
	March 10,			March 4,			March 10,			March 4,
	2007			2006			2007			2006
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of products sold (exclusive of items shown below)		51.1			52.1			51.4			51.0
Selling, delivery and administrative expenses		48.4			51.2			47.7			49.6
Restructuring credits		—			(3.8	)		(0.2	)		(0.9	)
Depreciation and amortization		2.6			2.7			2.5			2.5
Loss on sale or abandonment of assets		0.2			0.1			0.1			0.1
Operating loss		(2.3	)		(2.3	)		(1.5	)		(2.3	)
Interest expense		1.7			1.9			1.8			1.7
Reorganization charges, net		1.1			1.1			1.2			1.1
Other income		—			—			(0.1	)		(0.1	)
Loss before income taxes		(5.1	)		(5.3	)		(4.4	)		(5.0	)
Provision (benefit) for income taxes		(0.2	)		(0.4	)		(0.1	)		(0.6	)
Net loss		(4.9	)%		(4.9	)%		(4.3	)%		(4.4	)%

The net restructuring charges year-to-date included net gains on sale of real estate of approximately $0.5 million, additional exit 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 $5.2 million, additional exit costs related to relocation, taxes, security, utilities and cleanup of assets held for sale of $1.2 million and severance costs of approximately $0.3 million for the same period of the prior year.

~~Net~~Property ~~Sales~~and Equipment Impairment

~~(dollars~~We inrealized ~~thousands)~~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.

	Sixteen Weeks Ended													Forty Weeks Ended
	March 10,					March 4,					%			March 10,					March 4,					%
	2007		%			2006		%			Change			2007		%			2006		%			Change
Wholesale operations	$	768,577		89.2	%	$	774,564		88.5	%		(0.8	)%	$	1,969,859		88.8	%	$	2,049,747		88.3	%		(3.9	)%
Retail operations		93,064		10.8			100,245		11.5			(7.2	)		247,940		11.2			272,092		11.7			(8.9	)
Total net sales	$	861,641		100.0	%	$	874,809		100.0	%		(1.5	)%	$	2,217,799		100.0	%	$	2,321,839		100.0	%		(4.5	)%

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 assets for recoverability using a probability-weighted approach for continued use or disposal of certain assets and recorded an impairment of approximately $10.2 million in the first quarter of fiscal 2008. During the second quarter of fiscal 2008, final determination was made concerning the continued use or disposal of certain assets which resulted in a net valuation credit adjustment of approximately $0.4 million to the initial impairment charge.

~~Consolidated~~Operating ~~net sales. Net sales for the third quarter of fiscal 2007, the sixteen weeks~~Loss ended March 10, 2007, were approximately $861.6 million, a decrease of approximately $13.2 million, or 1.5%, from net sales of approximately $874.8 million in the same period in fiscal 2006. Year-to-date net sales for fiscal 2007 decreased approximately $104.0 million, or 4.5%, to approximately $2,217.8 million, from net sales of approximately $2,321.8 million, in fiscal 2006.

~~Wholesale~~(dollars operations net sales. Wholesale operations net sales for the third quarter of fiscal 2007 were approximately $768.6 million, a decrease of approximately $6.0 million, or 0.8%, from net sales of approximately $774.6 million in ~~fiscal 2006. Year-to-date wholesale operations net sales~~thousands) ~~for fiscal 2007 decreased approximately $79.8 million, or 3.9%, to approximately $1,969.9 million~~ from net sales of approximately $2,049.7 million in fiscal 2006. The net sales for the third quarter and year-to-date periods for fiscal 2007 reflected unit volume declines of approximately 6.2% and 8.7%, respectively, as compared to comparable periods in fiscal 2006. These unit volume declines for the quarter and year-to-date for fiscal 2007 as compared to fiscal 2006 were the result of sales


	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	%

~~Table~~Consolidated ofOperating ~~Contents~~Loss

~~discontinued~~Based asupon ~~part~~the ofabove ~~our restructuring efforts~~factors, ~~reduced~~the ~~demand~~operating loss for ~~our~~the ~~products~~second quarter of fiscal 2008 was approximately $16.7 million, ~~and~~an increase of approximately $9.9 million from the prior year’s operating loss of approximately $6.8 million. Our operating loss for the ~~effects~~second quarter of fiscal 2008 included a ~~highly~~net ~~competitive~~charge ~~market~~to ~~with~~operations ~~increased~~of ~~promotional~~approximately ~~spending~~$7.9 million ~~These~~for ~~declines are~~restructuring ~~partially~~activities. ~~offset~~Restructuring byactivities anfor ~~overall~~the ~~unit~~same ~~value~~period ~~increase,~~in ~~related~~the toprevious ~~selling~~year ~~price~~resulted ~~increases~~in ~~and~~a ~~product~~net ~~mix~~credit ~~changes~~of approximately $4.2 million. Our fiscal 2008 year-to-date operating loss was approximately $17.0 million, an increase of approximately 6$2.4%5 million ~~for~~from the ~~third~~same ~~quarter~~period ~~and~~in 5the prior year of approximately $14.5% million. ~~for~~Our ~~the~~ year-to-date ~~periods~~operating of loss for fiscal ~~2007~~2008 included asa ~~compared~~net charge to operations of approximately $17.7 million for restructuring activities and property and equipment impairment. Similar charges for the ~~prior~~same period of the previous year were a net credit of approximately $3.7 million.

~~Retail operations net sales. Retail operations net sales for the third quarter of fiscal 2007 were~~37 approximately $93.1 million, a decrease of approximately $7.1 million, or 7.2%, from net sales of approximately $100.2 million for the same period in fiscal 2006. Year-to-date retail operations net sales for fiscal 2007 decreased approximately $24.2 million, or 8.9%, to approximately $247.9 million from net sales of approximately $272.1 million for the same period in fiscal 2006. The decline in revenue is mainly attributable to the closing of retail outlets in conjunction with our restructuring efforts.

~~Gross~~Route ~~profit~~operating ~~(exclusive~~income. ofRoute ~~depreciation~~operating ~~and~~income ~~amortization).~~for ~~Gross~~the ~~profit~~second ~~was~~quarter of fiscal 2008 was approximately $~~421~~6.4 million, orrepresenting 48an increase of approximately $0.9% million from route operating income of ~~net~~approximately ~~sales,~~$5.5 million ~~for~~in the ~~third~~second quarter of fiscal 2007,. The second quarter increase in ~~comparison~~route ~~with~~ operating income was attributable to a decrease of approximately $~~419~~27.1 4 million, orin ~~47.9%~~route ofoperating ~~net~~costs partially offset by a decrease in route sales, ~~for~~of approximately $26.5 million when compared to the same period in ~~fiscal~~the ~~2006~~previous year. ~~Year~~ On a year-to-date ~~gross~~basis, route ~~profit~~operating income for fiscal 2008 was approximately $~~1,077~~29.97 million, orrepresenting 48an increase of approximately $17.1 million from an operating income of approximately $12.6% million for the same period of ~~net~~the ~~sales,~~prior year. The fiscal 2008 year-to-date increase in ~~comparison~~route operating income was ~~with~~attributable to a decrease of approximately $~~1,138~~40.76 million, orin ~~49.0%~~route operating costs partially offset by a decrease of ~~net~~approximately $23.5 million in route sales, when compared to the same period in the ~~fiscal~~prior ~~2006~~year.

~~Total~~Outlet ~~cost~~operating ofincome. ~~products~~Outlet ~~sold~~operating income for the second quarter ~~decreased~~of byfiscal 2008 was approximately $~~15.~~5.2 million ~~when~~representing ~~compared to~~an ~~the~~increase ~~same~~of ~~period~~approximately ~~in fiscal 2006~~$3.0 million ~~This~~from ~~cost~~outlet operating ~~decrease~~income ~~relates to the effects~~ of ~~reduced~~approximately ~~sales~~$2.2 million ~~on our~~in ~~costs, as a well as~~ the ~~production~~second ~~efficiencies~~quarter ~~gained~~of infiscal ~~our restructuring efforts~~2007. OnThe ~~a cost~~second ~~per~~quarter ~~pound~~increase ~~basis,~~in ~~direct~~outlet ~~component~~operating ~~costs~~income ~~per~~was ~~pound~~attributable ~~increased~~to ~~approximately~~a ~~5.8%~~decrease ~~when~~of ~~compared~~approximately to$10.4 ~~fiscal~~million ~~2006.~~in ~~These~~outlet ~~direct~~operating ~~component~~ costs, ~~when~~partially ~~compared~~offset onby a ~~cost~~decrease ~~per~~in ~~pound~~outlet sales of ~~production with~~approximately ~~fiscal~~$7.4 million ~~2006,~~when ~~increased~~compared ~~4.7%~~to ~~for~~the ~~ingredients,~~same ~~0.6%~~period ~~for~~in ~~packaging,~~the ~~and~~previous 0year.5% ~~for~~On ~~labor.~~a ~~Overhead~~year-to-date ~~and~~basis, ~~administrative~~outlet ~~costs~~operating asincome afor ~~percent~~fiscal of2008 ~~net~~was ~~sales decreased~~ approximately 0$12.4% million ~~when~~representing ~~compared~~an toincrease ~~fiscal~~of ~~2006~~approximately ~~principally~~$7.4 million asfrom aan ~~result~~operating income of ~~reductions~~approximately in$5.0 million ~~labor,~~for ~~labor-related,~~the ~~and facility costs resulting~~same ~~from~~period ~~our~~of ~~restructuring~~the ~~activities~~prior year. ~~Higher~~The ~~selling~~fiscal ~~prices~~2008 year-to-date ~~initiated~~increase in ~~response~~outlet tooperating ~~higher~~income ~~commodity~~was ~~costs~~attributable into ~~fiscal~~a ~~2007~~decrease ~~along with the net effect~~ of ~~the~~approximately ~~decline~~$20.0 million in ~~overhead~~outlet ~~and~~operating ~~administrative~~ costs~~, partially~~ partially offset by ~~the~~a ~~unfavorable~~decrease ~~increase~~of inapproximately ~~the~~$12.6 million ~~direct~~in ~~component~~outlet ~~cost~~sales ~~per pound of production~~ when compared to ~~our~~the ~~sales,~~same period ~~resulted~~ in ~~our gross profit margin improvement of approximately 1.0% for~~ the ~~third~~prior ~~quarter of fiscal 2007 when compared with fiscal 2006~~year.

~~Total~~Direct ~~cost~~operating ofincome. ~~products~~Direct ~~sold~~operating ~~year-to-date~~income ~~decreased~~for bythe second quarter of fiscal 2008 was approximately $432.3 million ~~when~~representing ~~compared~~an ~~to the~~improvement ~~same~~of ~~period~~approximately ~~in fiscal 2006~~$0.6 million Afrom ~~substantial~~operating income ~~amount~~ of ~~this~~approximately ~~cost~~$1.7 million ~~decrease~~in ~~relates~~the tosecond ~~the~~quarter ~~effects~~ of ~~reduced~~fiscal ~~sales~~2007. onThe ~~our~~increase ~~costs,~~in asdirect operating aincome ~~well~~for as the ~~production~~quarter ~~efficiencies~~was ~~gained~~attributable into ~~our~~an ~~restructuring efforts.~~increase Onin asales ~~cost~~of ~~per~~approximately ~~pound~~$7.2 million ~~basis,~~partially ~~direct~~offset ~~component~~by ~~costs~~an ~~per~~increase ~~pound~~in ~~increased~~operating costs of approximately $6.~~0% when~~6 million when compared to ~~fiscal~~the ~~2006.~~same ~~These~~period ~~direct~~of ~~component~~the ~~costs~~prior ~~when~~year. ~~compared~~On on a ~~cost~~year-to-date ~~per~~basis, ~~pound~~direct ofoperating income ~~production~~for ~~with~~ fiscal ~~2006~~2008 ~~increased~~was ~~5.3%~~approximately ~~for ingredients, 0~~$3.4%7 million ~~for~~representing ~~labor~~an ~~and~~improvement ~~0.3%~~of ~~for~~approximately ~~packaging~~$1.5 ~~Overhead~~million ~~and~~from ~~administrative~~operating ~~costs~~income ~~as a percent~~ of ~~net sales decreased~~ approximately 0$2.3%2 million ~~when compared~~for tothe ~~fiscal~~same ~~2006~~period ~~principally as a result~~ of ~~reductions~~the inprior ~~labor, labor-related, and facility~~year. ~~costs~~The ~~resulting~~fiscal ~~from~~2008 year-to-date ~~our~~increase ~~restructuring~~in ~~activities.~~direct ~~This~~operating ~~along~~income ~~with~~was ~~higher~~attributable ~~selling~~to ~~prices~~an ~~initiated~~increase in ~~response to~~ ~~higher~~direct ~~commodity~~sales ~~costs~~of inapproximately ~~fiscal~~$14.9 million ~~2007 only~~ partially offset by ~~the~~an ~~net effect of the unfavorable~~ increase in ~~the~~operating ~~direct~~costs ~~component cost per pound~~ of ~~production resulting in our gross profit margin~~ ~~decrease of~~ approximately 0$13.4~~% for year-to-date fiscal 2007 when compared to the same period in fiscal 2006~~ million.

~~Selling,~~Reorganization ~~delivery and administrative expenses. Selling, delivery and administrative expenses were~~Charges approximately $417.3 million, representing 48.4% of net sales, for the third quarter of fiscal 2007 down from approximately $447.5 million, or 51.2% of net sales when compared with the same period in fiscal 2006. Year-to-date selling, delivery and administrative expenses for fiscal 2007 amounted to approximately $1,058.7 million, or 47.7% of net sales, decreasing from approximately $1,151.8 million, or 49.6% of net sales for the same period in the prior year.

For the ~~third~~ quarter ofended ~~fiscal~~November 17, 2007, ~~the~~reorganization ~~reduction~~charges inrelating ~~selling,~~to ~~delivery~~expense ~~and~~or ~~administrative~~income items ~~expenses~~that aswe aincurred ~~percent~~under ofour ~~net~~bankruptcy ~~sales~~proceedings ~~was~~were approximately 2$11.7% million. ~~when~~The ~~compared~~cost ~~to the third quarter~~ of ~~the~~ ~~previous~~these ~~year.~~activities Aincludes ~~substantial~~(1) professional ~~portion~~fees ofand ~~our~~similar ~~cost~~types ~~decreases~~of ~~relates~~expenses ~~directly~~related to ~~our restructuring~~the ~~activities,~~Chapter 11 ~~which~~proceedings ~~resulted~~of inapproximately ~~route,~~$12.4 million; ~~depot,~~(2) lease ~~and~~rejection ~~retail~~charges ~~outlet~~of ~~consolidations and closings~~$0. ~~Our~~1 ~~labor~~million; ~~and~~(3) interest ~~labor-related~~income ~~costs,~~of ~~including workers’ compensation, decreased~~ approximately 1$0.8%6 million; asand ~~a percent~~(4) credits of ~~net~~approximately ~~sales~~$0.2 million ~~Additionally,~~resulting ~~advertising,~~from ~~energy~~gains ~~costs~~realized ~~and~~on ~~all~~asset ~~other costs decreased as a percent of net~~ sales ~~by 0~~.~~5%, 0.2% and 0.2%, respectively.~~

34Reorganization charges for the quarter ended November 18, 2006 were approximately $10.1 million including approximately (1) $10.5 million of professional fees; (2) $0.4 million in payroll related charges to retain key employees during our reorganization; (3) $0.5 million of interest income; and (4) $0.3 million gain realized on the sale of assets.

~~Table~~Second quarter year-to-date reorganization charges for fiscal 2008 were approximately $18.9 million and included (1) professional fees of ~~Contents~~approximately $20.0 million; (2) a credit for an accrual adjustment for employee retention expense of approximately $0.2 million; (3) lease rejection charges of approximately $0.3 million; (4) interest income of approximately $1.0 million; and (5) gains realized on asset sales of $0.2 million.

OnSecond aquarter year-to-date ~~basis,~~reorganization ~~the~~charges ~~reduction~~for infiscal ~~selling,~~2007 ~~delivery~~were ~~and~~approximately ~~administrative expenses as a~~$16.7 million ~~percent~~and ofincluded ~~net~~(1) professional ~~sales~~fees ~~when compared to the same period~~ of ~~the previous year was~~ approximately 1$18.~~9%. As~~4 million; ~~with~~(2) employee ~~this~~retention ~~quarter, a substantial portion~~ expense of ~~the~~approximately ~~cost decrease relates directly to our restructuring activities, which resulted in route, depot, and retail outlet consolidations and closings~~$0.7 million; ~~Our~~(3) lease ~~labor~~rejection ~~and~~charges ~~labor-related~~of ~~costs, including workers’ compensation, decreased~~ approximately 1$0.5%1 million; as(4) interest aincome ~~percent~~ of ~~net~~approximately ~~sales~~$1.7 million; ~~Additionally, advertising~~ and ~~all~~(5) gains ~~other~~realized ~~costs decreased~~on asasset asales ~~percent~~ of ~~net sales, each by approximately~~ $0.2%8 million.

~~Restructuring credits. During the third quarter of fiscal 2007, we incurred net restructuring~~38 credits of approximately $0.2 million related to the continuation of certain restructuring plans to close and restructure certain bakeries and retail stores as compared to net restructuring credits of approximately $33.3 million for the same period in fiscal 2006. On a year-to-date basis, we incurred net restructuring credits of approximately $3.9 million as compared to net restructuring credits of approximately $21.7 million for the same period in the prior year.

~~The~~Interest ~~net restructuring credits in the third quarter of fiscal 2007 were composed of a credit of~~Expense approximately $0.7 million for the adjustment of severance accruals and approximately $0.5 million net exit costs such as utility costs, security, taxes and clean up activities. Year-to-date restructuring credits were composed of a credit of approximately $0.4 for severance accruals, and approximately $5.2 million in gains on disposals of long-lived assets, offset by other exit costs of approximately $1.7 million.

~~See~~Net ~~Note~~interest 14expense for the second quarter was approximately $11.3 million ~~Restructuring~~representing ~~(Credits)~~a ~~Charges~~decrease of approximately $0.1 million when compared to ~~the~~approximately ~~condensed~~$11.4 million ~~consolidated~~in ~~financial~~the ~~statements~~second quarter of ~~regarding~~fiscal ~~detail~~2007. ~~components~~This ofdecrease ~~restructuring~~results ~~charges~~from a slight decrease in interest rates.

~~Operating~~Year-to-date ~~Loss~~interest expense was approximately $22.3 million representing a decrease of approximately $1.9 million when compared to approximately $24.2 million for the same period of fiscal 2007. This decrease results from a reduction of funded debt totaling approximately $45 million with slightly lower interest rates and a decrease in collateral review fees.

~~(dollars~~Provision infor ~~thousands)~~Income Taxes

	Sixteen Weeks Ended												Forty Weeks Ended
	March 10,						March 4,						March 10,						March 4,
	2007			%			2006			%			2007			%			2006			%
Wholesale operations	$	4,393			(22.3	)%	$	(28,589	)		144.0	%	$	19,183			(56.1	)%	$	(19,048	)		36.4	%
Retail operations		1,556			(7.9	)		(199	)		1.0			6,555			(19.2	)		6,883			(13.1	)
		5,949			(30.2	)		(28,788	)		145.0			25,738			(75.3	)		(12,165	)		23.3
Corporate		(25,615	)		130.2			8,929			(45.0	)		(59,914	)		175.3			(40,118	)		76.7
Total operating loss	$	(19,666	)		100.0	%	$	(19,859	)		100.0	%	$	(34,176	)		100.0	%	$	(52,283	)		100.0	%

The effective income tax benefit rates were 5.4% and 3.1% for year-to-date fiscal 2008 and fiscal 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.

~~Consolidated~~CASH ~~operating~~RESOURCES ~~loss.~~AND ~~Based upon the above factors, the operating loss for the third quarter~~LIQUIDITY of fiscal 2007 was approximately $19.7 million, a decrease of approximately $0.2 million from the prior year’s operating loss of approximately $19.9 million. Our fiscal 2007 year-to-date operating loss was approximately $34.2 million, down approximately $18.1 million from the prior year’s operating loss of approximately $52.3 million. Our fiscal 2007 operating loss for the quarter included a restructuring credit of approximately $0.2 million as compared to a restructuring credit of approximately $33.3 million for the same period in the prior year. Our fiscal 2007 year-to-date operating loss included a restructuring credit of approximately $3.9 million as compared to a restructuring credit of approximately $21.7 million for the same period in the prior year.

~~Wholesale~~CASH ~~operating income (loss). Wholesale operating income for the third quarter of fiscal 2007~~FLOWS was approximately $4.4 million representing an increase of approximately $33.0 million from an operating loss of approximately $28.6 million in the third quarter of fiscal 2006. On a year-to-date basis, the net wholesale operating income was approximately $19.2 million, an increase of approximately $38.2 million from an operating loss of approximately $19.0 million when compared to the same period in the prior year. The third quarter increase in

35During the twenty-four weeks ended November 17, 2007, 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 in cash used in investing activities, and $3.7 million in cash used for financing activities.

~~Table~~Cash ofFrom ~~Contents~~(Used In) Operating Activities

~~wholesale~~Cash from operating ~~income~~activities for fiscal 2008 was ~~attributable~~ to$5.6 million, awhich ~~decrease~~represents ofan ~~approximately~~increase of $3935.02 million infrom ~~wholesale~~cash ~~operating~~used ~~costs~~in ~~partially offset~~the bysame aperiod ~~decrease~~ in ~~income~~fiscal 2007 of ~~approximately~~ $629.06 million. OnWhile we posted a net ~~year~~loss of $55.2 million during the twenty-four week period, some items contributing to the loss were non-~~date~~cash ~~basis~~items, ~~the~~including ~~increase~~$30.9 million related to depreciation and amortization and $9.6 million in ~~wholesale~~losses ~~operating~~on ~~revenue~~sale, write-down or abandonment of ~~approximately~~assets. Changes in working capital components generated $3814.23 million ~~was~~in ~~attributable~~cash during the twenty-four week fiscal period primarily due to (1) a decrease in ~~wholesale~~ ~~operating~~accounts ~~costs~~receivable of ~~approximately~~ $~~118~~17.13 million; ~~partially~~(2) a reduction in inventories of $11.9 million; offset by a(3) an decrease in ~~revenue~~ accounts payable and accrued expense of ~~approximately~~$14.4 million; and (4) other items totaling $790.95 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.

~~Retail~~Cash ~~operating~~From ~~income~~ (~~loss~~Used In). ~~Retail~~Investing ~~operating income for the third quarter of fiscal 2007 was~~Activities approximately $1.6 million representing an improvement of approximately $1.8 million from operating loss of approximately $0.2 million in the third quarter of fiscal 2006. The increase in retail operating income for the quarter was attributable to a decrease of approximately $9.0 million in retail operating expenses partially offset by a reduction in sales of approximately $7.2 million.

OnCash aused ~~year-~~in investing activities to- date ~~basis~~during ~~the~~fiscal ~~net~~2008 ~~retail~~was ~~operating~~$10.7 million, ~~income~~a ~~for~~$89.6 million reduction in the cash generated during fiscal 2007 ~~was~~of ~~approximately~~$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 $689.62 million (excluding interest earned) at August 25, a2006, ~~decrease~~the effective date of ~~approximately~~the $0eighth amendment to the DIP Facility. During the twenty-four week period of fiscal 2008, we received $3.8 million ~~from~~in asset ~~approximately~~sale proceeds and made deposits to the restricted cash account in accordance with the DIP Facility in the amount of $63.9 million into ~~operating~~date (excluding interest earned). We used $10.6 million ~~income~~to ~~for~~acquire property, equipment and software assets. During the same period in fiscal 2007, we received asset sale proceeds in the ~~prior~~amount ~~year~~of $13.2 million ~~The~~and ~~year-~~made deposits to~~-date~~ ~~decrease~~the inrestricted cash ~~retail~~account ~~operating~~in ~~income was~~accordance ~~attributable~~with tothe aDIP ~~drop~~Facility in ~~revenues~~the amount of ~~approximately~~ $2411.14 million. ~~partially~~During ~~offset~~the ~~by a~~same ~~reduction~~period in ~~retail~~fiscal ~~operating~~2007, ~~expenses~~purchases of ~~approximately~~property, equipment and software assets totaled $2312.84 million.

~~Reorganization charges. For the sixteen weeks ended March 10, 2007, reorganization charges~~39 relating to expense or income items that we incurred under our bankruptcy proceedings were approximately $10.0 million. The cost of these activities includes (1) professional fees and similar types of expenses related to the Chapter 11 proceedings of approximately $10.5 million; and (2) approximately $0.3 million in payroll related charges to retain key employees during our reorganization; partially offset by (3) interest income of approximately $0.8 million.

~~Reorganization~~Cash ~~charges~~From ~~for the forty weeks ended March 10, 2007 were approximately $26.7 million consisting of~~ (~~1) professional~~Used ~~fees and similar types of expenses related to the Chapter 11 proceedings of approximately $29.0 million; and (2~~In) ~~approximately~~ ~~$1.0 million~~Financing ~~in payroll related~~Activities ~~charges to retain key employees during our reorganization; offset by (3) interest income of approximately $2.5 million; and (5) approximately $0.8 million in gains on the sale of assets.~~

~~Reorganization~~Cash ~~charges~~used ~~for~~in ~~the~~financing ~~sixteen~~activities ~~weeks~~to ~~ended~~date ~~March 4,~~in ~~2006~~fiscal ~~were~~2008 ~~approximately~~was $~~10.~~3.7 million, $42.1 million less than ~~consisting~~the cash used during the same period in fiscal 2007 of ~~(1)~~$45.8 ~~professional~~million. ~~fees~~This ~~and~~cash ~~similar~~used ~~types~~during 2007 is primarily due to a payment of ~~expenses~~our ~~incurred~~pre-petition ~~directly~~secured ~~related~~debt of $45.4 million. The previously discussed eighth amendment to the DIP Facility released restricted cash plus accumulated interest ~~Chapter 11~~in ~~proceedings~~the amount of ~~approximately~~ $1090.17 million; ~~(2)~~effective August ~~approximately~~25, 2006 and required that $145.4 million inof ~~payroll~~that ~~related~~amount ~~charges~~be used to ~~retain~~reduce ~~key~~the ~~employees~~outstanding ~~during~~balance ~~our~~of ~~reorganization;~~the ~~and~~pre-petition ~~(3) charges~~senior ~~related~~secured todebt. ~~the~~This ~~rejection~~compares ofto ~~certain~~cash ~~lease~~used ~~agreements~~in ~~covering~~financing ~~equipment~~activities ~~and~~in ~~real~~fiscal ~~estate~~2008 of ~~approximately~~$3.7 million due primarily to $05.6 million; in debt fees offset by ~~(4) interest~~an ~~income~~increase in our pre-petition senior secured revolving credit facility due to letter of ~~approximately~~credit $1draws.~~8 million.~~

~~Reorganization~~SOURCES ~~charges~~OF ~~for~~LIQUIDITY ~~the~~AND ~~forty weeks ended March 4, 2006 were approximately $28.4 million~~CAPITAL consisting of (1) professional fees and similar types of expenses incurred directly related to the Chapter 11 proceedings of approximately $25.9 million; (2) approximately $5.8 million in payroll related charges to retain key employees during our reorganization; and (3) charges related to the rejection of certain lease agreements covering equipment and real estate of approximately $0.5 million; partially offset by (4) interest income of approximately $3.2 million; and (5) approximately $0.6 million gain on the sale of assets.

~~Interest~~We ~~expense.~~have ~~Net~~historically ~~interest~~maintained ~~expense~~two primary sources for debt capital: (1) bank lines of credit; and (2) capital and operating lease financing to support the ~~third~~acquisition ~~quarter~~and ~~was~~lease ~~approximately~~of our bakery outlets, depots, route trucks, tractors, trailers and computer equipment. In addition, on August 12, 2004, we issued in a private placement $14100.70 million ~~representing~~ aaggregate ~~decrease~~principal amount of ~~approximately~~our $16.80% senior subordinated convertible notes due August ~~million~~15, ~~when~~2014. ~~compared~~Purchasers had an option to ~~approximately~~purchase in the aggregate up to $1620.50 million in ~~the~~additional ~~third~~notes ~~quarter~~for a period of ~~fiscal~~60 days ~~2006.~~following ~~This~~the closing, ~~decrease~~which ~~resulted~~purchase ~~primarily~~option ~~from~~was anot $1exercised.~~6 million~~ ~~decline in~~Under certain circumstances, the ~~amortized~~notes ~~debt~~are convertible ~~fees~~at ~~associated~~the ~~with~~option of the ~~pre-petition~~holder ~~and~~into ~~post-petition~~shares ~~debt~~of ~~facilities~~our ~~and~~common astock at an initial conversion ~~decrease~~rate inof ~~funded~~98.9854 ~~debt~~shares ~~levels~~per $1,000 ~~offset~~principal byamount ~~slightly~~of ~~higher~~notes ~~interest~~(an ~~rates~~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.

~~Year-to-date~~At ~~interest~~November 17, ~~expense~~2007, ~~was~~under ~~approximately~~our ~~$38.8 million~~Senior ~~representing~~Secured anCredit ~~increase~~Facility, ofwe ~~only~~owed $0374.2 million ~~when~~in ~~compared~~term loans toand ~~approximately~~ $3976.0 million ~~for~~in ~~the~~a ~~same~~revolver ~~period of fiscal 2006~~loan. ~~This decrease~~In ~~results~~addition, ~~from~~at ~~decreases~~November 17, in2007, ~~amortized~~we ~~debt~~had ~~fees~~issued ~~associated with the pre-petition and~~$89.4 ~~post-petition~~million ~~debt~~in ~~facilities~~letters ~~offset~~of bycredit ~~somewhat~~under ~~higher~~our ~~interest~~revolver ~~costs resulting from higher interest rates on a decrease in funded debt levels~~loan.

~~Provision~~The ~~for~~foregoing ~~income~~commitments ~~taxes.~~regarding ~~The~~our ~~effective~~senior ~~income~~secured ~~tax~~term ~~benefit~~and ~~rates~~revolving ~~were~~credit ~~3.8%~~facilities and ~~11.9~~our 6% ~~for~~senior ~~the first~~subordinated ~~three~~convertible ~~quarters~~notes ofdue ~~fiscal~~August 15, ~~2007~~2014 ~~and~~include ~~2006,~~significant ~~respectively.~~obligations ~~Our~~that occurred ~~effective~~prior ~~income~~to ~~tax~~our ~~benefit~~bankruptcy ~~rate was~~filing ~~impacted~~(see ~~favorably~~Voluntary inChapter 11 ~~the~~Bankruptcy ~~first~~Filing ~~quarter~~below). ofUnder the ~~fiscal~~Bankruptcy ~~2006~~Code, byactions ~~adjustments~~ to ~~our~~collect ~~prior~~pre-petition ~~year~~indebtedness ~~tax accruals~~are stayed and byour ~~the~~other contractual ~~approval~~obligations ofmay ~~tax~~not ~~credits~~be ~~for~~enforced ~~prior~~against ~~years~~us. ~~Our~~Therefore, ~~effective~~the ~~income~~commitments ~~tax~~shown ~~rates~~above ~~for~~may ~~fiscal~~not ~~2007~~reflect ~~and~~actual ~~2006~~cash ~~were~~outlays ~~negatively~~in ~~impacted~~future ~~by valuation allowances recorded~~periods.

36Voluntary Chapter 11 Bankruptcy Filing

~~Table~~On September 22, 2004 (the Petition Date), due to significantly limited liquidity, we and each of our ~~Contents~~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.

~~because~~Subsequent weto dothe ~~not~~Petition Date, the Company and a syndicate of lenders, including JPMorgan Chase ~~believe~~Bank, ~~that~~entered itinto isa ~~more~~debtor-in-possession ~~likely~~Revolving ~~than~~Credit ~~not~~Agreement ~~our~~to ~~net~~provide ~~operating~~up ~~losses~~to ~~and~~$200.0 million ~~certain~~in ~~other~~post-petition ~~deferred~~financing. ~~tax~~The Revolving Credit Agreement has been amended ten times, ~~assets~~including ~~will~~the bemost ~~able~~recent toamendment bedated ~~utilized~~October 1, in2007 ~~future~~(collectively, ~~years~~DIP Facility). WeThe ~~provide~~DIP Facility expires on the occurrence of an event that constitutes a ~~valuation~~termination ~~allowance~~date ~~against~~as defined in ~~deferred~~the ~~tax~~DIP ~~assets~~Facility agreement or, if no such event has occurred, ~~based~~pursuant to an extension, on ~~management’s~~February 9, ~~assessment~~2008. ofAll ~~operating~~outstanding ~~results~~borrowings under the DIP Facility, if any, are due and ~~other~~payable ~~available~~on the ~~evidence,~~termination itdate. isThe ~~more~~obligations ~~likely~~under ~~than~~the ~~not~~DIP ~~that~~Facility ~~some~~are orsecured ~~all~~by a superpriority lien against our assets in favor of the ~~deferred~~DIP ~~tax~~lenders. ~~assets~~The ~~will~~DIP ~~not~~Facility may be utilized for the issuance ~~realized~~of letters of credit up to an aggregate amount equal to $150.0 million, ~~During~~which ~~fiscal~~amount ~~2007~~was ~~and~~increased from ~~2006~~the original limitation of $75.0 million as a result of prior amendments. In connection with entering into the DIP Facility, we ~~recorded~~also ~~additional~~make ~~valuation~~periodic ~~allowance~~adequate ~~relating~~protection payments to our ~~deferred~~pre-petition ~~tax~~secured ~~assets~~lenders ~~originating~~ in ~~those~~the ~~years~~form of interest, fees and expenses based on amounts owed under the pre-petition Senior Secured Credit Facility.

~~The income tax benefit we have recognized in fiscal 2007 relates principally to expected refunds of~~40 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. Only a portion of the net operating loss we incur is eligible for this treatment. Our effective tax rate for fiscal 2007 is based, in large part, upon our estimate of the amount of our fiscal 2007 loss which we expect to be eligible for the ten year carryback. Our fiscal 2006 tax provision also reflects the impact of the ten year carryback.

~~CASH~~The ~~RESOURCES~~DIP ~~AND~~Facility ~~LIQUIDITY~~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 hereunder.

~~CASH~~In ~~FLOWS~~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 a case 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 debt secured by any of our assets which have an aggregate value in excess of $1.0 million; (5) the entry of any judgment in excess of $1.0 million against us, the enforcement of which remains unstayed; (6) certain Termination Events (as defined in the DIP Facility) related to ERISA plans; and (7) failure to make payments required by Section 302(f)(1) of ERISA where the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $1.0 million, subject to certain exceptions. Notwithstanding acceleration pursuant to an event of default, the maturity date of the DIP Facility is February 9, 2008.

~~During~~At ~~the forty weeks ended March~~November 1017, 2007, ~~the~~we ~~Company~~were ~~used $7.3 million of cash, which was the net impact of $30.8 million~~ in ~~cash~~compliance ~~used~~with inall ~~operating~~financial ~~activities~~covenants, ~~$68.5 million~~terms inand ~~cash~~conditions ~~generated~~of ~~from~~the ~~investing~~DIP ~~activities, and $45~~Facility.~~0 million in cash used in financing activities.~~

~~Cash~~As ~~from~~of ~~(used~~November 17, ~~in) operating activities. Cash used in operating activities for fiscal~~ 2007 ~~was $30.8 million~~, ~~which represents a decrease of $14.5 million from cash used in fiscal 2006 of $45.3 million. While~~ we ~~posted~~had anot ~~net~~borrowed ~~loss~~under ~~of $94.9 million during~~ the ~~forty~~DIP ~~week~~Facility. ~~period~~However, ~~some items contributing to~~ the ~~loss~~DIP ~~were~~Facility ~~non-cash~~was utilized ~~items, including $54.5 million related~~ to ~~depreciation~~support ~~and amortization~~the ~~and~~issuance ~~$3.3 million~~of inletters ~~gains on sale, write-down or abandonment~~ of ~~assets.~~credit ~~In addition, changes~~ in ~~working~~the ~~capital~~amount ~~components~~of ~~generated~~ $9122.21 million ~~in cash during the forty week fiscal period~~ primarily ~~due~~ to support ~~(1) a~~our ~~decrease~~workers’ incompensation ~~other~~and ~~current~~auto ~~assets~~liability ofinsurance $8programs.~~0 million;~~ ~~(2) a~~These ~~reduction~~letters ~~in accounts receivable~~ of ~~$4.0 million;~~credit were ~~(3) an~~partially ~~increase~~collateralized inby ~~accounts~~approximately ~~payable and accrued expenses of~~ $019.62 million; ~~offset by (4) an increase in our inventories~~ of ~~$1.7 million;~~restricted ~~and~~cash ~~(5) other~~as ~~items totaling~~required ~~$1.7 million.~~by ~~For fiscal 2006, changes in working capital components provided cash equal~~the toDIP ~~$25~~Facility.~~1 million.~~

~~Cash~~As ~~from~~a (result of the Chapter 11 filing, our principal sources of liquidity used in) ~~investing~~funding ~~activities.~~short-term operating ~~Cash~~expenses, ~~provided~~supplies byand ~~investing~~employee ~~activities~~obligations ~~during~~include ~~fiscal~~cash ~~2007~~balances, operating and ~~was~~investing cash flows and the $68200.50 million, ~~$88~~DIP Facility.~~1 million~~ ~~more~~As ~~than~~of ~~the~~November 17, ~~cash~~2007, ~~used~~we ~~during~~had approximately ~~fiscal~~$58.4 million ~~2006~~in ofavailable cash and $1951.68 million. ~~This significant~~available ~~increase~~for isborrowing ~~primarily~~under ~~attributable~~the DIP Facility. This compares to the ~~release,~~$67.2 million ~~pursuant~~in toavailable ~~the~~cash ~~eighth~~and ~~amendment~~$90.3 million toavailable for borrowing under the DIP Facility, as of ~~restricted~~June 2, ~~cash~~2007. ~~previously~~These ~~held~~amounts asof ~~collateral~~available ~~and~~cash ~~unavailable~~exclude ~~to the Company~~$27.3 inmillion ~~the~~and ~~amount of~~ $8932.29 million ~~(excluding~~at ~~interest~~November 17, ~~earned)~~2007 atand ~~August~~June 252, ~~2006~~2007, ~~the~~respectively, ~~effective~~related ~~date~~to checks ofwritten ~~the~~in ~~eighth~~excess ~~amendment~~of torecorded ~~the~~balances ~~DIP~~included ~~Facility.~~in ~~During~~accounts ~~the~~payable ~~forty~~on ~~week~~our ~~period,~~consolidated ~~we received $14.4~~balance ~~million~~sheets. inWe ~~asset~~cannot ~~sale~~assure ~~proceeds~~you ~~and~~that ~~made deposits to~~ the ~~restricted~~amount of cash ~~account~~from inoperations ~~accordance~~and ~~with the~~from our DIP Facility inwill be ~~the~~sufficient ~~amount~~to offund ~~$12.5 million~~operations ~~(excluding~~until ~~interest~~such ~~earned).~~time Weas ~~used~~we ~~$22.8 million~~ are able to ~~acquire~~propose ~~property,~~a ~~equipment~~plan ~~and~~of ~~software~~reorganization that ~~assets.~~will ~~During~~receive ~~fiscal~~the ~~2006~~requisite acceptance by creditors, weequity ~~received~~holders ~~asset~~and ~~sale proceeds~~parties in ~~the~~interest ~~amount~~and be ofconfirmed ~~$79.8 million~~by ~~and~~the ~~made~~Bankruptcy ~~deposits~~Court. toIn the ~~restricted~~event that cash ~~account~~flows ~~in accordance~~and ~~with~~available borrowings under the DIP Facility inare ~~the amount~~not ofsufficient ~~$74.3 million.~~to ~~During~~meet ~~fiscal~~our ~~2006~~liquidity requirements, ~~purchases~~we ofmay ~~property~~be ~~and~~required ~~equipment~~to ~~totaled~~seek additional ~~$25~~financing.2 ~~million.~~

~~Cash~~Since ~~from~~the ~~(used~~Petition ~~in)~~Date, ~~financing~~we ~~activities.~~have ~~Cash~~been ~~used~~actively engaged in ~~financing~~restructuring ~~activities~~our ~~for~~operations ~~fiscal~~and ~~2007 was~~selling ~~$45.0 million,~~assets ~~primarily~~no ~~due~~longer necessary to aour ~~reduction~~operations. inWe continue to analyze our ~~pre-petition~~business ~~secured~~based ~~debt~~on a number of ~~$45.4 million.~~factors ~~The previously~~including, ~~discussed~~but ~~eighth~~not ~~amendment~~limited to, ~~the~~historical ~~DIP~~sales ~~Facility~~results, ~~released~~expected ~~restricted~~future ~~cash~~sales ~~plus accumulated~~results, ~~interest~~cash inavailability, ~~the~~production ~~amount~~costs, utilization of ~~$90.7 million effective August 25~~resources, ~~2006~~ and ~~required~~manufacturing ~~that~~and ~~$45.4 million~~distribution ofefficiencies. ~~that~~As ~~amount~~part beof ~~used~~our torestructuring ~~reduce~~efforts ~~the~~we ~~outstanding~~are ~~balance~~evaluating ofvarious ~~the~~alternatives including, ~~pre-petition~~but ~~secured~~not ~~debt.~~limited ~~This compares~~ to, ~~cash~~the ~~generated~~sale ~~from~~of ~~financing~~some ~~activities~~or inall ~~fiscal~~of ~~2006~~our ~~which~~assets, ~~totaled~~infusion ~~$12.0 million~~of ~~due~~capital, debt ~~mostly~~restructuring toand anthe ~~increase~~filing inof ~~our~~a ~~pre-petition~~plan ~~secured~~of ~~revolving~~reorganization ~~credit~~with ~~facility~~the Bankruptcy Court, or any combination of ~~$13~~these options.~~4 million.~~

~~SOURCES~~The OFmaturity ~~LIQUIDITY~~date ~~AND~~of ~~CAPITAL~~the DIP Facility has been extended to June 2, 2008. We may need to negotiate an additional extension of the maturity date or refinance the DIP Facility to provide adequate time to complete a plan of reorganization. There can be no assurance that we will be successful in extending or refinancing the DIP Facility or that we can extend or refinance the DIP Facility on terms favorable to us. Failure to obtain such extension or additional or replacement financing would have a material adverse impact on our ability to operate as a going concern.

~~We have historically maintained two primary sources for debt capital: (1) bank lines of credit; and~~41 (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 $100.0 million aggregate principal amount of 6% senior subordinated convertible notes due in August 2014. Failure to maintain adequate sources of debt capital would have a material adverse impact on our operations.

37On October 1, 2007, we entered into the first amendment to the Amended and Restated Revolving Credit Agreement 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 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.

~~Table~~On November 29, 2007, we entered into the second amendment to the Amended and Restated Revolving Credit Agreement which changes the date for delivery of ~~Contents~~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 lender may request in writing a plan to be delivered within twenty-one days of receipt of the written request.

AtOn ~~March~~December 1019, 2007, ~~under~~we ~~our~~entered ~~Senior~~into ~~Secured~~the third amendment to the Amended and Restated Revolving Credit ~~Facility~~Agreement which (1) extends the maturity date from February 9, we2008 ~~owed~~to June 2, 2008; (2) redefines the real property component of the borrowing base to the lesser of (a) $~~374~~80.10 million inor (b) 40% ~~term~~of ~~loans~~the borrowing base inclusive of the real property component but excluding the plan ~~and~~reserve; ~~$73.4~~(3) ~~million~~amends inthe apermitted ~~revolver~~capital ~~loan.~~expenditures Inby ~~addition,~~fiscal atquarter ~~March~~through the quarter ending May 1031, ~~2007,~~2008; we(4) amends ~~had~~the ~~issued~~minimum ~~$101.7~~cumulative consolidated EBITDA by fiscal quarter through the quarter ending May ~~million~~31, 2008; and (5) limits cash restructuring charges for the fiscal period inbeginning ~~letters~~December 17, of2006 ~~credit~~and ~~under~~ending ~~our~~May 31, ~~revolver~~2008 ~~loan~~to $23.0 million.

OnOur ~~August 12,~~future ~~2004,~~capital werequirements ~~issued~~will independ aon ~~private~~many ~~placement~~factors, ~~$100.0 million~~including ~~aggregate~~our ~~principal~~evaluation ~~amount~~ of various alternatives in connection with our ~~6.0%~~restructuring, ~~senior~~the ~~subordinated~~form ~~convertible~~of ~~notes~~our ~~due~~plan ~~August 15~~of reorganization, ~~2014.~~the aggregate ~~Purchasers~~amount ~~had~~to anbe ~~option~~distributed to ~~purchase~~ increditors to satisfy claims, the ~~aggregate~~amount upof toany ~~$20.0 million~~unknown inclaims or ~~additional~~contingent ~~notes~~claims ~~for~~from acreditors ~~period~~or equity holders, the outcome of ~~60 days~~litigation ~~following~~and the costs of administering the ~~closing~~Chapter 11 process, ~~which~~including ~~purchase~~legal ~~option~~and ~~was~~other ~~not exercised~~fees. ~~Under~~At ~~certain~~this ~~circumstances,~~time ~~the~~it ~~notes~~is ~~are~~not ~~convertible~~possible atto predict the ~~option~~exact amount or nature of ~~the~~such ~~holder~~future ~~into~~capital ~~shares~~requirements. ofIn ~~our~~addition, there ~~common~~can ~~stock~~be atno anguarantee ~~initial~~that ~~conversion rate~~additional ofcapital ~~98.9854~~will ~~shares~~be ~~per~~available $1to us,~~000~~ ~~principal~~or ~~amount~~that ofsuch ~~notes~~capital will ~~(an~~be ~~initial~~available ~~conversion~~on ~~price~~favorable ~~of $10~~terms.~~1025~~ ~~per~~Raising ~~share)~~additional capital could result in the significant dilution or cancellation of current equity interests, ~~subject~~but it is not possible to ~~adjustment~~predict the extent of such potential dilution or whether existing equity will be cancelled at this time.

~~The~~Our ~~foregoing~~financial ~~commitments~~statements ~~regarding~~are ~~our~~prepared ~~senior~~on ~~secured~~a ~~term~~going-concern basis, which contemplates the realization of assets and ~~revolving~~the ~~credit~~satisfaction ~~facilities~~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, 6%downward ~~senior~~sales ~~subordinated~~trends, ~~convertible~~and ~~notes~~the ~~due~~potential ~~August~~lack of liquidity should we be unable to successfully reorganize under Chapter 1511, ~~2014~~there ~~include~~is ~~significant~~substantial ~~obligations~~doubt ~~that~~about our ability to continue as a going ~~occurred~~concern. ~~prior~~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 ~~bankruptcy~~assets, ~~filing~~infusion of ~~(see~~capital, ~~Voluntary~~debt ~~Chapter 11~~restructuring ~~Bankruptcy~~and ~~Filing~~the ~~below).~~development, ~~Under~~confirmation and implementation of a plan of reorganization, our ability to comply with the ~~Bankruptcy~~terms ~~Code~~of the DIP Facility, ~~actions~~our ability to ~~collect~~negotiate an ~~pre-petition~~extension ~~indebtedness~~of ~~are~~or ~~stayed~~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 ~~other~~ability to generate sufficient cash from ~~contractual~~operations to meet our obligations ~~may~~and any combination of these factors. In the event our restructuring activities are not successful and we are required to liquidate, additional significant adjustments would be ~~enforced~~necessary ~~against~~in usthe carrying value of assets and liabilities, the revenues and expenses reported and the balance sheet classifications used. ~~Therefore~~Further, the ~~commitments~~value ~~shown~~of debt ~~above~~and equity interests may ~~not~~ ~~reflect~~be ~~actual~~significantly ~~cash~~or ~~outlays~~completely impaired in ~~future~~the ~~periods~~event of a liquidation or conversion to a Chapter 7 proceeding.

~~Voluntary Chapter 11 Bankruptcy Filing. On September 22, 2004 (the “Petition Date”), due to significantly limited liquidity, we and each of our wholly~~OFF-~~owned~~BALANCE ~~subsidiaries~~SHEET ~~filed voluntary~~FINANCING 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 Court.

~~Subsequent~~We todo ~~the~~not ~~Petition~~participate ~~Date, the Company and a syndicate of lenders, including JPMorgan Chase Bank, entered into the DIP Facility, which was subsequently revised and approved by the Court, to provide up to $200.0 million~~ in ~~post-petition financing. The DIP Facility expires on the occurrence of an event that constitutes a termination date as defined in the DIP Facility agreement or~~, ifnor ~~no such~~secure ~~event~~financings ~~has occurred~~for, ~~pursuant to an extension, on February 9, 2008. All outstanding borrowings under the DIP Facility, if~~ any, are due and payable on the termination date. The obligations under the DIP Facility are secured by a super priority 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 $150.0 millionunconsolidated, ~~which~~special ~~amount~~purpose ~~was increased from the original limitation of $75~~entities.0 million as a result of prior amendments. In connection with entering into the DIP Facility we also make periodic adequate protection payments to our pre-petition secured lenders in the form of interest, fees and expenses based on amounts owed under the pre-petition Senior Secured Credit Facility.

~~The DIP Facility subjects us to certain obligations, including the delivery of financial statements~~42 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.

InFINANCIAL ~~addition,~~INFORMATION ~~payment~~ABOUT ~~under~~INDUSTRY ~~the DIP Facility may be accelerated following certain events of default~~SEGMENTS including, but not limited to, (1) the conversion of any of the bankruptcy cases to a case 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 debt secured by any of our assets which have an aggregate value in excess of $1.0 million; (5) the entry of any judgment in excess of $1.0 million against us, the enforcement of which remains unstayed; (6) certain Termination Events (as defined in the DIP Facility) related to ERISA plans; and (7) failure to make payments required by Section 302(f)(1) of ERISA where the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $1.0 million, subject to certain exceptions. Notwithstanding acceleration pursuant to an event of default, the maturity date of the DIP Facility is February 9, 2008.

38We 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.

~~Table~~Our route sales, formerly wholesale operations, consist of ~~Contents~~an aggregation of our eight business units that manufacture, distribute, and sell fresh baked goods utilizing our direct store delivery system.

AtOur ~~March 10~~outlet sales, ~~2007~~formerly retail operations, weconsist ~~were~~of infive ~~compliance~~regions ~~with~~that ~~all~~sell ~~financial~~our ~~covenants,~~baked ~~terms~~goods and other ~~conditions~~food ofitems ~~the DIP~~directly ~~Facility~~to consumers through company-operated outlet locations.

AsOur ofdirect ~~March 10,~~sales ~~2007,~~consist weof ~~had~~our ~~not~~direct ~~borrowed~~warehouse ~~under~~shipment ~~the DIP Facility. However~~program, ~~the~~which ~~DIP~~ships ~~Facility~~bulk ~~was~~packaged sweet ~~utilized~~goods toand ~~support~~dry ~~the~~products, ~~issuance~~such ofas ~~letters~~croutons ofand ~~credit~~stuffing inmix, ~~the~~directly ~~amount~~to ofcustomer-owned ~~$109.1 million primarily to~~distribution ~~support~~centers ~~our workers’ compensation~~ and ~~auto~~public ~~liability~~warehouses ~~insurance~~for ~~programs~~distribution. ~~These letters of credit~~ ~~were partially collateralized by $8.8 million of restricted cash as required by the DIP Facility.~~

AsSee aNote 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 cash flows and the $20019.~~0 million~~ ~~DIP~~Segment ~~Facility.~~Information ~~As of March 10, 2007, we had approximately $70.9 million in available cash and $90.9 million available for borrowing under the DIP Facility. This compares~~ to ~~the~~ ~~$78.2 million~~these incondensed ~~available~~consolidated ~~cash~~financial ~~and~~statements ~~$90.1 million available~~ for ~~borrowing under the DIP~~further ~~Facility as of June 3, 2006~~information. ~~These amounts of available cash exclude $37.6 million and $26.7~~ million at March 10, 2007 and June 3, 2006, 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.

~~Since~~RECENT ~~the~~ACCOUNTING ~~Petition Date, we have been actively engaged in restructuring our operations and selling~~PRONOUNCEMENTS 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.

~~The~~See ~~maturity~~Note ~~date of the DIP Facility has been extended to February 9, 2008~~2. WeDescription ~~may need to negotiate an additional extension~~ of ~~the~~Business ~~maturity~~and ~~date~~Significant orAccounting ~~refinance~~Policies ~~the DIP Facility~~ to ~~provide adequate~~these ~~time to complete a plan of reorganization. There can be no assurance that we will be~~condensed ~~successful~~consolidated infinancial ~~extending~~statements orfor ~~refinancing~~further ~~the~~information ~~DIP~~regarding ~~Facility~~recently orissued ~~that we can extend or refinance the DIP~~accounting ~~Facility on terms favorable to us~~standards. ~~Failure to obtain such extension or additional or replacement~~ ~~financing would have a material adverse impact on our ability to operate as a going concern.~~

~~Our~~FORWARD-LOOKING ~~future capital requirements will depend on many factors, including our evaluation of various~~STATEMENTS 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 new capital. 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 of current equity interests, but it is not possible to predict the extent of such potential dilution at this time.

~~Our~~Some ~~financial~~information ~~statements~~contained ~~are~~in ~~prepared~~or onincorporated aby ~~going~~reference ~~concern~~herein ~~basis,~~may ~~which~~be ~~contemplates~~forward-looking ~~the realization~~statements ofwithin ~~assets and~~ the ~~satisfaction~~meaning of ~~liabilities in~~ the ~~normal~~federal ~~course~~securities ~~of business~~laws. ~~However,~~These ~~no assurance~~forward-looking ~~can~~statements beare ~~given~~not historical ~~that~~in wenature ~~will~~and beinclude ~~able~~statements tothat ~~continue~~reflect, towhen ~~operate~~made, onour aviews ~~going~~with ~~concern~~respect ~~basis.~~to ~~Because~~current ofevents ~~the Chapter 11 filing process~~ and ~~the~~financial ~~circumstances~~performance. ~~leading~~These toforward-looking ~~the~~statements ~~bankruptcy~~can ~~there~~be isidentified by ~~substantial~~forward-looking ~~doubt~~words ~~about~~such ~~our ability to continue~~ as a“may,” ~~going concern. Our continuation as a going concern is dependent upon~~“will,” ~~among other things~~“expect,” ~~our ability to evaluate various alternatives including the sale of some or all of our assets~~“intend,” ~~infusion of capital~~“anticipate,” ~~debt restructuring and the~~“believe,” ~~development~~“estimate,” ~~confirmation and implementation of a~~ “plan ~~of reorganization~~,” ~~our ability to comply with the terms of the DIP Facility~~“could,” ~~our~~“should” ~~ability~~and to“continue” ~~obtain~~or ~~financing~~similar ~~upon~~words. ~~exit~~These ~~from bankruptcy and~~forward-looking ~~our~~statements ~~ability~~may toalso ~~generate~~use ~~sufficient~~different ~~cash from operations to meet our obligations and any combination of these factors~~phrases. InThese ~~the~~forward-looking ~~event~~statements ~~our restructuring activities~~ are not ~~successful~~historical ~~and we are required to liquidate, additional significant adjustments would be necessary~~ in ~~the carrying value of assets~~ ~~and~~nature ~~liabilities, the revenues~~ and ~~expenses~~include ~~reported~~statements ~~and~~relating ~~the~~to, ~~balance~~among ~~sheet~~other ~~classifications used.~~things: ~~Further,~~

39 • our ability to continue as a going concern; • our ability to obtain court approval with respect to motions filed by us from time to time in the Chapter 11 proceeding; • our ability to operate pursuant to the covenants, terms and certifications of the DIP Facility; • our ability to negotiate an extension (if necessary) or refinance our DIP Facility, which, pursuant to an extension, expires on June 2, 2008; • our ability to implement our business plan 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; • our ability to confirm and consummate a plan of reorganization with respect to the Chapter 11 proceeding;

~~Table of Contents~~43

• our ability to obtain the ~~value~~financing ofnecessary ~~debt~~to implement our business plan and ~~equity~~emerge ~~interests~~from ~~may~~Chapter be11; ~~significantly~~• risks associated with third parties seeking and obtaining court approval to terminate or ~~completely~~shorten ~~impaired~~any insuch exclusivity period, for the ~~event~~ appointment of a ~~liquidation~~Chapter 11 trustee or ~~conversion~~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.

~~OFF~~These forward-~~BALANCE~~looking ~~SHEET~~statements ~~FINANCING~~are and will be subject to numerous risks and uncertainties, many of which are beyond our control that could cause actual results to differ materially from such statements. Factors that could cause actual results to differ materially include, without limitation:

WeBankruptcy-Related ~~do not participate in, nor secure financings for, any unconsolidated, special purpose entities.~~Factors

~~FINANCIAL~~• ~~INFORMATION~~the ~~ABOUT~~evaluation ~~INDUSTRY~~of ~~SEGMENTS~~ 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;

~~We have two reportable segments: Wholesale Operations, which consists of aggregation of our ten~~44 profit centers that manufacture, distribute, and sell fresh baked goods; and Retail Operations, which consists of five regions that sell our baked goods and other food items. See Note 20. Segment Information to these condensed consolidated financial statements for further information.

~~RECENT~~• ~~ACCOUNTING~~our ~~PRONOUNCEMENTS~~ ability to implement our business plan developed as a basis for our discussion regarding one or more plans of reorganization; • 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; • the significant time that will be required by management to structure and implement a plan of reorganization as well as to evaluate various alternatives including, but not limited to, the sale of the Company or some or all of our assets, infusion of capital and debt restructuring or any combination of these options; • 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.

~~See~~General ~~Note 2. Description of Business and Significant Accounting Policies to our condensed~~Factors ~~consolidated financial statements for further information regarding recently issued accounting standards~~

~~FORWARD~~• 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-~~LOOKING~~employer ~~STATEMENTS~~ 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;

~~Some information contained in or incorporated by reference herein may be forward-looking statements~~45 within the meaning of the federal securities laws. These 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:

• ~~our~~changes ~~ability~~in toconsumer ~~continue~~tastes asor aeating ~~going~~habits; ~~concern~~• costs associated with environmental compliance and remediation; • our ability to obtain ~~court~~concessions ~~approval~~from ~~with~~our ~~respect~~unionized workforce to ~~motions~~reduce ~~filed~~costs byand usallow ~~from~~for ~~time~~greater toflexibility ~~time~~ in the ~~Chapter~~method 11and ~~proceeding~~manner of distributing our products; • ~~our~~obligations ~~ability~~and touncertainties ~~operate~~with ~~pursuant~~respect to the ~~covenants,~~ABA ~~terms~~Plan; ~~and~~• ~~certifications~~the impact of ~~the~~any ~~DIP~~withdrawal ~~Facility;~~liability •arising under our ~~ability~~multi-employer topension ~~negotiate~~plans anas ~~extension~~a ~~(if~~result ~~necessary)~~of orprior ~~refinance~~actions ~~our~~or ~~DIP~~current ~~Facility,~~consolidations; ~~which~~• ~~expires~~actions onof ~~February~~governmental 9entities, ~~2008~~including regulatory requirements; • ~~our~~acceptance ~~ability~~of tonew ~~develop,~~product ~~propose,~~offerings ~~confirm~~by consumers and ~~consummate~~our ~~one~~ability orto ~~more~~expand ~~plans~~existing ofbrands; ~~reorganization~~• ~~with~~the ~~respect~~performance toof ~~the~~our ~~Chapter~~recent 11and ~~proceeding;~~planned •new ~~our~~product ~~ability~~introductions, toincluding ~~achieve~~ the ~~following~~success ~~four~~of ~~priorities~~such ~~established~~new byproducts ~~Mr.~~in ~~Jung:~~achieving ~~(1)~~and ~~fix~~retaining ~~our~~market ~~cost~~share; ~~structure~~• tothe ~~grow~~effectiveness ~~margins~~of hedging activities; ~~(2)~~• ~~accelerate~~expenditures ~~innovation~~necessary to ~~realize~~carry ~~attractive~~out ~~revenue~~cost-saving ~~growth;~~initiatives ~~(3)~~and ~~drive~~savings ~~productivity~~derived tofrom ~~improve~~these ~~margins~~initiatives; ~~and~~• ~~(4)~~changes ~~create~~in aour ~~performance~~business ~~culture~~strategies; • ~~risks~~unexpected ~~associated~~costs ~~with~~or ~~failing~~delays toincurred ~~obtain~~in ~~court~~connection ~~approval~~with ~~for~~our ~~one~~previously orannounced ~~more~~and ~~extensions~~other tofuture ~~the~~facility ~~exclusivity~~closings; ~~period~~• ~~for~~bankruptcy usfilings toby ~~propose~~customers; ~~and~~• ~~confirm~~changes ~~one~~in orour ~~more~~relationship ~~plans~~with ofemployees ~~reorganization~~and orthe ~~with~~unions ~~third~~that ~~parties~~represent ~~seeking~~them; ~~and~~• ~~obtaining~~the ~~court~~outcome ~~approval~~of legal proceedings to ~~terminate~~which orwe ~~shorten~~are ~~any~~or ~~such~~may ~~exclusivity~~become ~~period~~a party, ~~for~~including ~~the~~without ~~appointment~~limitation ofany alitigation ~~Chapter~~stemming 11from ~~trustee~~our orsale toof ~~convert~~convertible ~~the~~notes ~~Chapter~~on 11August ~~proceeding~~12, to2004 aor ~~Chapter~~events 7leading ~~proceeding;~~up •to ~~risks~~our ~~associated~~filing ~~with~~of ~~inflationary~~a ~~cost~~voluntary ~~increases~~petition infor ~~materials,~~protection ~~ingredients,~~under ~~energy~~Chapter ~~and~~11 ~~employee~~of ~~wages~~the ~~and~~Bankruptcy ~~benefits~~Code; • ~~risks~~business ~~associated~~disruption ~~with~~from terrorist acts, our ~~restructuring~~nation’s ~~process,~~response ~~including~~to ~~the~~such ~~risks~~acts ~~associated~~and ~~with~~acts ~~achieving~~of ~~the~~war; ~~desired~~and • other factors.

40These statements speak only as of the date of this Quarterly Report on Form 10-Q, 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.

~~Table~~Similarly, these and other factors, including the terms of ~~Contents~~any reorganization plan ultimately confirmed, can affect the value of our various pre-petition liabilities, common stock and/or other equity securities. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 proceeding to each of these liabilities and/or securities. Accordingly, we urge that the appropriate caution be exercised with respect to existing and future investments in any of these liabilities and/or securities.

savings in connection with our profit center restructuring and bakery and route consolidations; • potential adverse publicity; • 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 finalize, fund and execute a going-forward business plan; • our ability to retain, motivate and/or attract key executives and employees; • changes in our relationship with employees and the unions that represent them; • increased costs and uncertainties related to periodic renegotiation of union contracts; • increased costs and uncertainties with respect to the ABA Plan; • successful resolution of material weaknesses in our internal controls; • resolution of any deficiencies and implementation of software updates with respect to our financial reporting systems; • changes to dietary guidelines; • the continuing effects of changes in consumers’ eating habits; • the performance of our recent 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.46

~~These~~Item 3. ~~forward-looking~~Quantitative ~~statements are~~ and ~~will~~Qualitative beDisclosure ~~subject~~about toMarket ~~numerous risks and uncertainties, many~~Risk ~~of which are beyond our control that could cause actual results to differ materially from such statements. Factors that could cause actual results to differ materially include, without limitation:~~

~~Bankruptcy-Related~~We ~~Factors~~are exposed to market risks relative to commodity price fluctuations. We actively manage these risks through the use of forward purchase contracts and derivative financial instruments. As a matter of policy, we use derivative financial instruments only for hedging purposes, and the use of derivatives for trading and speculative purposes is prohibited.

•Commodity our ability to evaluate various alternatives including, but not limited to, the sale of 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 develop and implement a successful plan of reorganization in the Chapter 11 process; • 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 these relationshipsPrices

41Commodities we use in the production of our products are subject to wide price fluctuations, depending upon factors such 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, sweeteners, soybean oil, and certain fuels, we sometimes enter into forward purchase contracts and commodity futures and options in order to fix prices for future periods. 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.

~~Table~~Item 4. ofControls ~~Contents~~and Procedures

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. • the significant time that will be required by management to structure and implement (a) Disclosure ~~plan~~Controls ~~of reorganization as well as to evaluate various alternatives including, but not limited to, the sale of some or all of our assets, infusion of capital~~ and debt restructuring or any combination of these options, as well as our restructuring plan; • 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.Procedures

~~General~~We ~~Factors~~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.

•Our ~~the~~management, ~~availability~~with ofthe ~~capital~~participation ~~on acceptable terms in light~~ of ~~the various factors discussed herein, including~~ our ~~reorganization~~Chief ~~under~~Executive ~~the~~Officer ~~Chapter 11 process; • the availability~~ and ~~cost~~Chief ofFinancial ~~raw materials~~Officer, has ~~packaging,~~evaluated ~~fuels and utilities, and~~ the ~~ability~~effectiveness ~~to recover these costs in the pricing~~ of ~~products,~~our ~~improved~~disclosure ~~efficiencies~~controls and ~~other~~procedures ~~strategies;~~as •of ~~increased pension~~November 17, ~~health~~2007. Based ~~care,~~on ~~workers’~~that ~~compensation~~evaluation and ~~other~~due ~~employee costs; • actions of competitors, including pricing policy and promotional spending; • increased costs, delays or deficiencies related~~ to ~~restructuring activities; •~~ the ~~effectiveness~~existence of ~~advertising~~material ~~and~~weaknesses ~~marketing~~in ~~spending; • the effectiveness and adequacy of~~ our ~~information~~internal ~~and~~control over ~~data~~financial ~~systems: • changes in general economic and business conditions (including in the bread and sweet goods markets); • costs associated with increased contributions to single employer~~reporting, ~~multiple employer or multi-employer pension plans; • any inability to protect and maintain the value of~~ our ~~intellectual~~Chief ~~property;~~Executive •Officer future product recalls or food safety concerns; • further consolidation in the retail food industry; • changes in consumer tastes or eating habits; • costs associated with environmental compliance and ~~remediation;~~Chief •Financial ~~increased~~Officer ~~costs~~have ~~and~~concluded that ~~uncertainties~~our ~~related~~disclosure tocontrols ~~periodic renegotiation of union contracts; • obligations~~ and ~~uncertainties~~procedures ~~with~~were ~~respect~~not toeffective ~~the ABA Plan; • the impact of any withdrawal liability arising under our multi-employer pension plans~~ as ~~a result~~ of ~~prior~~November 17, ~~actions or current consolidations;~~2007.

42(b) Changes in Internal Control Over Financial Reporting

~~Table~~There ofwere ~~Contents~~no changes in our internal control over financial reporting during the quarterly period ended November 17, 2007, except as described below.

•Management ~~actions~~believes ofthat ~~governmental~~all ~~entities, including regulatory requirements; • acceptance~~ of ~~new product offerings by consumers and our ability to expand existing brands; •~~ the ~~performance~~material ofweaknesses ~~our~~described ~~recent~~under ~~new product introductions, including~~ the ~~success~~caption of“Item 9A ~~such~~— Controls ~~new~~and ~~products~~Procedures” in ~~achieving and retaining market share; •~~ the ~~effectiveness~~Company’s ofAnnual ~~hedging~~Report ~~activities;~~on •Form ~~expenditures necessary to carry out cost~~10-~~saving~~K ~~initiatives~~for ~~and~~the ~~savings~~fiscal ~~derived~~year ~~from~~ended ~~these~~June 2, ~~initiatives;~~2007 •existed ~~changes~~as inof ~~our~~November 17, ~~business~~2007, ~~strategies; • unexpected costs or delays incurred in connection with our previously announced~~ and ~~other~~we ~~future~~are ~~facility~~continuing ~~closings;~~to •address ~~bankruptcy~~deficiencies ~~filings by customers; • changes~~ in ~~our relationship with employees and~~ the Company’s ~~unions~~internal ~~that~~controls. ~~represent~~Certain ~~them; • the outcome~~ of ~~legal~~these ~~proceedings~~remediation toactions ~~which we~~ are ordescribed ~~may~~under ~~become~~the acaption “Item 9A ~~party,~~— ~~including~~Controls ~~any~~and ~~litigation~~Procedures” ~~stemming~~in ~~from~~the ~~our~~Company’s ~~sale~~Annual ofReport ~~convertible~~on ~~notes~~Form on10-K ~~August~~for ~~12,~~the ~~2004~~fiscal year orended ~~events~~June 2, ~~leading~~2007. upEfforts to ~~our~~remediate ~~filing~~and oftest aour ~~voluntary~~internal ~~petition~~control ~~for~~over ~~protection~~financial reporting ~~under~~are ~~Chapter~~continuing 11and ofare ~~the~~expected ~~Bankruptcy Code; • business disruption from terrorist acts, our nation’s response~~ to ~~such~~continue ~~acts~~throughout ~~and~~fiscal ~~acts~~2008 ~~of war;~~ and ~~• other factors~~beyond.

~~These~~During ~~statements~~the ~~speak~~second ~~only~~quarter as of ~~the~~fiscal ~~date of this report~~2008, ~~and~~the weCompany ~~disclaim~~continued ~~any~~its ~~intention~~implementation ~~or obligation~~of toa ~~update or revise any forward-looking statements to reflect~~ new ~~information, future~~human ~~events~~resource ormanagement ~~developments~~and orpayroll ~~otherwise,~~system ~~except~~across asits ~~required by law~~operations. ~~All~~As ~~subsequent~~appropriate, ~~written~~the ~~and~~Company ~~oral~~is ~~forward-looking~~modifying ~~statements~~the ~~attributable~~design toand usdocumentation ~~and~~of ~~persons~~internal ~~acting~~control onprocesses ~~our~~and ~~behalf~~procedures ~~are~~relating ~~qualified~~to inthe ~~their~~new ~~entirety~~system byto ~~the~~supplement ~~cautionary~~and ~~statements~~complement ~~contained~~existing ininternal ~~this~~controls ~~section~~over ~~and~~financial ~~elsewhere herein~~reporting.

~~Similarly, these and other factors, including the terms of any reorganization plan ultimately~~47 confirmed, can affect the value of our various pre-petition liabilities, common stock and/or other equity securities. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 proceeding to each of these liabilities and/or securities. Accordingly, we urge that the appropriate caution be exercised with respect to existing and future investments in any of these liabilities and/or securities.

~~Item 3~~PART II. ~~Quantitative~~OTHER ~~and Qualitative Disclosure about Market Risk~~INFORMATION

~~We are exposed to market risks relative to commodity price fluctuations~~Item 1. WeLegal ~~actively manage~~Proceedings these risks through the use of forward purchase contracts and derivative financial instruments. As a matter of policy, we use derivative financial instruments only for hedging purposes, and the use of derivatives for trading and speculative purposes is prohibited.

~~Commodity~~In ~~prices.~~June 2003, ~~Commodities~~a wepurported ~~use~~shareholder derivative lawsuit was filed in ~~the~~Missouri ~~production~~state court against certain current and former officers and directors of ~~our~~IBC, ~~products~~seeking ~~are~~damages ~~subject~~and toother ~~wide~~relief. ~~price~~In the ~~fluctuations~~case, ~~depending~~which ~~upon~~is ~~factors~~captioned ~~such~~Miller asv. ~~weather~~Coffey, ~~crop~~et ~~production~~al., ~~worldwide~~No. 03-CV-216141 ~~market~~(Cir. ~~supply~~Ct., ~~and~~Jackson Cty.), ~~demand~~plaintiffs ~~and~~allege ~~government~~that ~~regulation.~~the Todefendants ~~reduce~~in ~~the~~this ~~risk~~action ~~associated~~breached ~~with~~their ~~commodity~~fiduciary ~~price~~duties ~~fluctuations,~~to IBC by ~~primarily~~using ~~for~~material ~~wheat,~~non-public ~~corn,~~information ~~sugar,~~about ~~soybean~~IBC ~~oil~~to ~~and~~sell ~~certain~~IBC ~~fuels,~~stock weat ~~sometimes~~prices ~~enter~~higher ~~into~~than ~~forward~~they could ~~purchase~~have ~~contracts~~obtained ~~and~~had ~~commodity~~the ~~futures~~market ~~and~~been ~~options~~aware inof ~~order~~the tomaterial ~~fix~~non-public ~~prices~~information. ~~for~~Our ~~future~~Board ~~periods.~~of Directors Apreviously had received a shareholder derivative demand from the plaintiffs in the June ~~sensitivity~~2003 ~~analysis~~derivative ~~was~~lawsuit, ~~prepared~~requesting legal action by us against certain officers and, ~~based~~directors ~~upon~~of IBC. In response, our ~~commodity-related~~Board ~~derivative~~of ~~positions~~Directors asappointed ofa Special Review Committee to evaluate the ~~March~~demand and to report to the board. Prior to our Chapter ~~10,~~11 ~~2007~~filing, anthe ~~assumed~~parties ~~10%~~had ~~adverse~~agreed ~~change~~to instay the ~~commodity~~lawsuit ~~prices~~until ~~would~~October 11, ~~not~~2004 ~~have~~and aalso ~~material~~had ~~effect~~initiated preliminary discussions looking towards onthe ~~our~~possibility ~~fair~~of ~~values~~resolving the matter. On November 26, ~~future~~2007, ~~earnings~~the orcircuit ~~cash~~court ~~flows~~dismissed the lawsuit without prejudice pursuant to local court rules.

43As previously disclosed in our fiscal 2007 Form 10-K, the South Coast Air Quality Management District in California, or SCAQMD, issued a Notice of Violation on June 11, 2003 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 of Violation alleges we were in violation of the permit through 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 received 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 claim through an allowed, pre-petition, general unsecured claim in the amount of $150,000, which is awaiting finalization of a stipulation to be filed with the Bankruptcy Court.

~~Table~~We record accruals for contingencies, such as legal proceedings, in accordance with SFAS No. 5, Accounting for Contingencies. See Note 2. Description of ~~Contents~~Business and Significant Accounting Policies to these condensed 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 4. Controls and Procedures~~ 48

~~(a)~~Item ~~Disclosure~~2. ~~Controls~~Unregistered Sales of Equity Securities and ~~Procedures~~Use of Proceeds

WeIssuer ~~maintain~~Purchases ~~disclosure~~of ~~controls~~Equity ~~and~~Securities ~~procedures~~ (~~as such term is defined in Rules 13a-15(e~~A) ~~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.

Our 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 March 10, 2007. Based on that evaluation and 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 March 10, 2007.


					*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

(b) Changes in Internal Control Over Financial Reporting


(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.

~~There were no changes in our internal control over financial reporting during the quarterly period~~49 ended March 10, 2007, except as described below. 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 June 3, 2006 existed as of March 10, 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 3, 2006. Efforts to remediate and test our internal control over financial reporting are continuing and are expected to continue throughout fiscal 2007 and beyond.

44Item 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		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

~~PART II. OTHER INFORMATION~~50

Item 1. Legal Proceedings


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

~~As previously disclosed in our 2007 second quarter Form 10-Q, we are involved in a dispute~~51 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 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 and tax rules. 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 resolution of this uncertainty prior to the end of the fiscal periods presented herein, as noted above we have continued to reflect our interests in the ABA Plan as an aggregate of single employer plans.

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.


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).

~~On December 4, 2006, the ABA Plan and the Board of Trustees served a summons upon us as a third~~52 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 administrative determination.

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. At a status conference held on April 5, 2007, the court scheduled oral argument on the PBGC’s motion for July 2, 2007.


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

~~As previously disclosed in our 2007 second quarter Form 10-Q, on October 30, 2006, Brencourt~~53 ~~Advisors, LLC, a stockholder of the Company, filed a complaint in the Court of Chancery of the State of Delaware for New Castle~~


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

~~Table of Contents~~54

County, captioned Brencourt Advisors LLC v. Interstate Bakeries Corporation, C.A. No. 2506-N (the “Complaint”) seeking to compel an annual meeting of stockholders for the purpose of electing directors. On November 29, 2006, we filed a motion with the Bankruptcy Court in response to the Complaint seeking (i) to have the Bankruptcy Court confirm our Board of Directors to be the nine individuals currently serving as members of our Board of Directors and (ii) an injunction from the Bankruptcy Court ordering Brencourt to cease the prosecution of the Complaint. On January 5, 2007, the Bankruptcy Court approved a settlement among the Company and its various constituency groups to reconstitute our Board of Directors from nine to seven members. Pursuant to the terms of the settlement, five directors left the Board, two new directors were appointed by the Bankruptcy Court and the remaining Board seat was filled by our new Chief Executive Officer on February 16, 2007. On January 11, 2007, the Complaint was dismissed without prejudice. For a further discussion regarding our reconstituted Board of Directors, see Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments.


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).

~~Item 1A. Risk Factors~~55

The risk factors set forth below update, and should be read together with, the risk factors disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 3, 2006.


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*

We* ~~face~~Filed ~~uncertainty regarding the adequacy of our capital resources, including liquidity, and have limited access to additional financing.~~ herewith

~~We currently have available a $200.0 million DIP Facility to potentially fund our post-petition~~56 operating expenses, supplier and employee obligations. The DIP Facility received interim approval by the Bankruptcy Court on September 23, 2004 and final approval on October 21, 2004. The DIP Facility has been amended nine times through the date of this filing.

~~The DIP Facility subjects us to certain obligations, including the delivery of a Borrowing Base~~SIGNATURES Certificate (as defined in the DIP Facility), cash flow forecasts and operating budgets at specified intervals, as well as certain limitations on the payment of indebtedness, entering into investments, the payment of capital expenditures and the payment of dividends. The DIP Facility also contains financial covenants, requiring minimum Consolidated EBITDA (as defined in the DIP Facility), restricting Capital Expenditures (as defined in the DIP Facility), and limiting the amount of periodic cash restructuring charges (as defined in the DIP Facility). There can be no assurance that we will be able to consistently comply with these obligations, financial covenants and other restrictive obligations in our DIP Facility.

WePursuant ~~are~~to ~~highly~~the ~~reliant~~requirements onof ~~suppliers~~Section 13 ~~and~~or ~~vendors~~15(d) toof ~~continue~~the toSecurities ~~provide~~Exchange ~~capital~~Act ~~and~~of ~~materials~~1934, ~~for our~~the ~~ongoing~~Registrant ~~operations.~~has ~~Any~~duly ~~interruptions~~caused inthis ~~our~~Report ~~capital~~to ~~and~~be ~~materials~~signed ~~could~~on ~~have~~its abehalf ~~material~~by ~~adverse effect~~the onundersigned, ~~our~~thereunto duly ~~operations~~authorized.

In addition to the cash requirements necessary to fund ongoing operations, we have incurred significant professional fees and other restructuring costs in connection with the Chapter 11 process and the restructuring of our business operations and expect that we will continue to incur significant professional fees and restructuring costs. As of March 10, 2007, we had approximately $70.9 million in available cash and $90.9 million available for borrowing under the DIP Facility. This compares to the $78.2 million in available cash and $90.1 million available for borrowing under the DIP Facility as of June 3, 2006. These amounts of available cash exclude $37.6 million and $26.7 million at March 10, 2007 and June 3, 2006, 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 amounts of cash from operations together with 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. We can provide no assurance that additional financing would be available or, if available, offered on acceptable terms. Failure to secure additional financing would have a material adverse impact on our operations.


	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)

~~As a result of the Chapter 11 process and the circumstances leading to the bankruptcy filing, our~~57 ~~access to additional financing is, and for the foreseeable future will likely continue to be, very limited. Our long-term liquidity~~

requirements and the adequacy of our capital resources are difficult to predict at this time and ultimately cannot be determined until a plan of reorganization has been developed and is confirmed by the Bankruptcy Court in the Chapter 11 process.

The maturity date of the DIP Facility has been extended from September 22, 2006 to February 9, 2008. We may need to negotiate an additional extension of the maturity date or refinance the DIP Facility to provide adequate time to complete a plan of reorganization. There can be no assurance that we will be successful in extending or refinancing the DIP Facility or that we can extend or refinance the DIP Facility on terms favorable to us.

Future cash contribution obligations to the American Bakers Association Retirement Plan, or the ABA Plan, are expected to significantly exceed previous contributions to the ABA Plan.

As a result of the review of the ABA Plan begun in December 2004, we have recorded a significant net pension liability. Since January 2006, we have been notified of $34.7 million of required contributions which we have not paid and due to our severely underfunded position within the plan, future cash contribution obligations could continue to significantly exceed levels experienced in calendar years prior to 2006. Our responsibility to make all of these payments, as well as the timing of such payments, may be impacted by application of the Bankruptcy Code and/or other applicable law, including the August 8, 2006 determination from the Pension Benefit Guaranty Corporation that the ABA Plan is a multiple employer plan, as had been asserted by the Company and disputed by the ABA Plan, as well as pension reform legislation recently enacted by Congress.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities (A)

					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 7 November 19-December 16, 2006		5	$	2.79		5		7,396,649
Period 8 December 17, 2006-January 13, 2007		1	$	2.86		1		7,396,648
Period 9 January 14-February 10, 2007		2	$	5.78		2		7,396,646
Period 10 February 11-March 10, 2007		8	$	3.31		8		7,396,638
Total		16	$	3.48		16		7,396,638

(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 March 10, 2007, 7,396,638 shares of our common stock were available 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 Bankruptcy filing in September 2004.

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 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 by reference to Exhibit 3.2 to Interstate Bakeries Corporation’s Form 8-K filed on March 21, 2007).
10.1		Employment Agreement by and among Interstate Bakeries Corporation, Interstate Brands Corporation and Craig D. Jung, dated January 30, 2007 (incorporated by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Form 8-K filed on January 31, 2007).
10.2		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, 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 Revolving 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 by reference to Exhibit 10.1 to Interstate Bakeries Corporation’s Form 8-K filed on February 16, 2007).
31.1		Certification of Craig D. Jung pursuant to Rule 13a-14(a)/15d-14(a)*
31.2		Certification of Ronald B. Hutchison 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 Ronald B. Hutchison 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: April 18, 2007	By:	/s/ Craig D. Jung
		Craig D. Jung
		Chief Executive Officer (Principal Executive Officer)
Dated: April 18, 2007	By:	/s/ Ronald B. Hutchison
		Ronald B. Hutchison
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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