I.B.C. trims first-quarter loss

by Eric Schroeder
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KANSAS CITY — "Tactical operating changes under way" and "continuing hard work" helped Interstate Bakeries Corp. trim its losses during the first quarter ended Aug. 25. The wholesale baker sustained a loss of $15,993,000 in the first quarter, which compared with a loss of $26,331,000 in the same period a year ago.

Net sales in the first quarter were $689,816,000, up narrowly from $684,245,000 in the first quarter of fiscal 2007.

The company sustained an operating loss of $264,000 in the period, which compared with a loss of $7,759,000 in the first quarter a year ago. The most recent results included a non-cash asset impairment charge of $10.2 million related to the company’s decision to close bread operations in the Southern California market.

The quarterly report was filed Oct. 4 by I.B.C. with the Securities and Exchange Commission, and came one day after the company received a 30-day extension to either strike a deal with its largest union or to develop plans for a possible liquidation of the company’s assets.

"Our improvement in results during our first quarter reflect both tactical operating changes under way that are designed to improve I.B.C.’s efficiency and profitability, and the continuing hard work of 25,000 dedicated employees," said Craig Jung, chief executive officer. "Our results are on-track and encouraging. At the same time, we recognize we have a long way to go in building operating capability and lowering our cost structure to ensure the company’s long-term survival and success. Critical to that success is a mutually acceptable agreement with the International Brotherhood of Teamsters that will enable I.B.C. to secure rational financing and fund our business plan. We remain open to constructive discussions with the Teamsters."

Reorganization charges for the quarter totaled $7,198,000, which compared with charges of $6,655,000 in the same period a year ago.

I.B.C. said its route sales, formerly known as wholesale operations, were $599,280,000 in the first quarter, up 0.5% from $596,331,000 in the same period a year ago. The gain reflected an overall unit value increase related to strategic price increases and product mix changes of approximately 6.9%. The gains were partially offset by a 4.8% unit volume decline, I.B.C. said.

"The unit volume declines 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," the company said.

In outlet sales, formerly known as retail operations, sales for the first quarter fell 6.5% to $74,070,000, reflecting the closing of retail outlets in conjunction with restructuring efforts and a 1.7% decrease in same-store sales related to the effects of retail price increases.

I.B.C. said it expects the exiting of the bread market in Southern California to result in restructuring charges of approximately $15.4 million, including $12.8 million of severance and severance related charges, and approximately $2.6 million in other charges.

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