Source:
CNN
Twinkies' maker files bankruptcy
Interstate Bakeries, hit by accounting and low-carb woes, seeks Chapter 11 protection.
September 22, 2004: 9:51 AM EDT
NEW YORK (CNN/Money) - Interstate Bakeries, maker of Wonder Bread and Twinkies, filed for bankruptcy court protection early Wednesday.
The company, which operates 57 bakeries throughout the United States and employs more than 33,000 people, listed assets of $1.6 billion and liabilities of $1.3 billion. It filed under Chapter 11 of the U.S. Bankruptcy Code, and said it intends to continue normal operations.
Shares of Interstate Bakeries (IBC: Research, Estimates) plunged by more than 35 percent in early trading Wednesday. Shares have lost nearly 90 percent of value since hitting a 52-week high of $16.88 in March.
The company has been hit by both accounting problems and a drop in sales it attributed to the popularity of low-carb diets. Last month, it missed an extended deadline for filing a 10K report with the Securities and Exchange Commission detailing its fiscal year financial results for the period ended May 29.
It said in a statement the filing was brought on by liquidity issues, resulting from declining sales, a high fixed-cost structure, excess industry capacity, rising employee healthcare and pension costs and higher costs for ingredients and energy.
The company also announced that Chairman and CEO James Elsesser had resigned. It named Leo Benatar as non-executive chairman and Antonio Alvarez as CEO. Alvarez is managing director of the turnaround firm Alvarez & Marsal. The company announced it had hired Alvarez & Marsal last month at the same time it announced the missed filing of a 10K.
Interstate Bakeries "has some of the most recognizable and popular baked breads and sweet goods brands in the nation," said a statement from Alvarez. "By filing for protection under Chapter 11 and obtaining the DIP (bankruptcy) financing, the company should have the liquidity, time and resources necessary to thoroughly identify, assess and address the issues that will enable this company to be successful in the future."
For the fiscal third quarter, the company reported a loss of $6.6 million, or 15 cents a share, little changed from the year-earlier loss in the period. Revenues were little changed at $1 billion.
Interstate said it arranged for $200 million in debtor-in-possession financing from JPMorgan Chase. The company announced earlier this month that it had arranged for up to $255 million of availability on its revolving credit line, but that it had agreed to pay a half-percentage point higher rate due to missing the 10K filing. It also said at that time it needed to complete the 10K filing by Sept. 26 to stay in compliance with terms of that loan.
