Originally created 09/23/04

Twinkie baker goes bankrupt



KANSAS CITY, Mo. - Interstate Bakeries Corp., the purveyor of lunchbox staples Wonder Bread and Twinkies, filed for bankruptcy protection Wednesday, felled by the combination of a more health-conscious public and smothering operational costs.

The nation's largest wholesale baker, which had shown signs of financial weakness for months, filed for Chapter 11 reorganization and installed new management, saying it intended to survive. The company said it would continue operating its bakeries, outlet stores and distribution centers.

Tony Alvarez, the head of turnaround firm Alvarez & Marsal and the baker's new chief executive, said the company had no immediate plans to lay off additional personnel. But, he added, "It's very rare in this country that anyone goes through Chapter 11 and is layoff-free."

For more than a year, Interstate Bakeries has struggled with declining sales of its bread and sweet goods products, a drop the company and analysts blame on the popularity of low-carb diets such as Atkins and South Beach.

Thomas Morabito, a food analyst at Longbow Research in Cleveland, said the company was hurt by what he called a "lack of innovation" in responding to the low-carb market; it didn't release a low-carb product until February.

The Kansas City-based company listed assets of $1.6 billion and liabilities of $1.3 billion in its court filings. In those filings, it said Chairman and CEO James Elsesser had resigned, effective Wednesday. Joining Mr. Alvarez from his firm is John Suckow, who was named Interstate Bakeries' chief restructuring officer.

Interstate Bakeries and its subsidiaries employ 32,000 people at 54 bakeries and 2,200 distribution centers and outlet stores across the country. In the past two years, the company has laid off about 800 employees as it closed several bakeries.

While Mr. Alvarez said he remained optimistic when speaking with employees Wednesday, he acknowledged in an interview that it could be weeks before he and his management team have a chance to study the company's operation and determine its future.

"After two days, I have more questions than answers," he said. "We're in an industry that is challenged because of consumer tastes."