The company said its profit center review will eliminate unprofitable products and routes, streamline distribution, rationalize the number of brands and stock keeping units, and eliminate excess capacity. The company hopes to complete the review by the end of the year.
“These actions are intended to improve the profitability by rationalizing marginal products,” Tony Alvarez, IBC’s chief executive officer, said. “The company will strengthen its focus on branded sales and deliveries, which we believe are key components in configuring the business for efficiencies in production, distribution, marketing and sales.”
Despite its efforts to exit unprofitable private label accounts and focus on its strong brands, IBC’s monthly consolidated operating reports showed continued sales declines in the third quarter. For the 16 weeks ended March 5, the company’s net sales fell 1.7% to $1 billion.
IBC’s profit center review represents the second stage in a multi-stage process that aims to emerge the company from bankruptcy protection. The first stage closed the Florence, S.C., facility, implemented a reduction in force, reduced corporate costs and reduced or suspended certain employee benefit programs. The second stage, which is in its infancy stage, will result in the following actions at three of IBC’s profit centers:
• Florida profit center: IBC will close its bakery in Miami and consolidate routes, depots and thrift stores in Florida and Georgia, where it maintains regional facilities. The consolidation affects about 600 workers and is expected to be completed by July 15. The company said it continues to serve the Florida marketplace from its bakeries in Columbus, Ga.; Jacksonville, Fla.; and Orlando, Fla.
The company’s preliminary estimate of charges to be incurred in connection with the Florida consolidation is about $9 million, including about $2 million in severance charges, about $5 million in asset impairment charges and about $2 million in other charges.
• Mid-Atlantic profit center: IBC will close its bakery in Charlotte, N.C., and consolidate routes, depots and thrift stores in North Carolina, South Carolina and Virginia. The consolidation affects 950 employees and is expected to be completed by July 23. Most of the production capacity at the Charlotte bakery will be transferred to the Rocky Mount, N.C., and Knoxville, Tenn., bakeries. The company said that the distribution of branded products to most customers in the Mid-Atlantic region will be unaffected.
The company’s preliminary estimate of charges to be incurred in connection with the Mid-Atlantic consolidation is about $15 million, including about $3 million in severance charges, about $8.5 million in asset impairment charges and about $3.5 million in other charges.
• Northeast profit center: IBC’s consolidation of its Northeast profit center will affect about 1,400 workers, and include the closure of its New Bedford, Mass., bakery and the consolidation of production, routes, depots and thrift stores in the Northeast region, where the company maintains many regional facilities. The consolidation is expected to be completed by mid-August.
“Our end goal is to greatly reduce the operating weakness and redundancies that continue to hurt our business—to save our company and as many jobs as possible,” Alvarez said.
The company’s preliminary estimate of charges to be incurred in connection with the Northeast profit center consolidation is about $17 million, including about $7 million in severance charges, about $7 million in asset impairment charges and about $3 million in other charges. In addition to the asset impairment charges, IBC expects to recognize charges to intangible assets related to trademarks and trade names that will be impaired as a result of the consolidation of Northeast operations.
“We’ve approached the profit center review process in great detail, identifying the critical issues in our most challenging regions first,” Alvarez said. “Much work remains to be done and the implementation of the profit center restructurings presents significant challenges and are not without execution risks.”
IBC filed for bankruptcy protection in September 2004, citing 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.