KANSAS CITY, Mo. - Like many Wall Street analysts keeping an eye on bankrupt Interstate Bakeries Corp., Morningstar’s Matthew Reilly would like to offer an opinion on whether the nation’s largest wholesale baker will emerge intact.
But the company that plies Americans with Wonder Bread and Hostess Twinkies hasn’t provided hard numbers to investors since April because a series of internal investigations and slip-ups have hampered its ability to issue quarterly and annual reports.
‘‘I think I and a lot of other people are scratching our heads over where the company is right now,’’ Reilly said. ‘‘They (management) were saying, ’we need to cut down to the roots and get down to our profitable business,’ but at the same time, they said they were not sure what that is.’’
A new chief executive, turnaround specialist Tony Alvarez, and his staff have been combing through the Kansas City-based Interstate’s finances, trying to get a handle on just how badly it’s doing and whether it can be saved. The 77-year-old company filed for Chapter 11 protection from creditors last month, citing a drop in sales partly because of the popularity of lowcarbohydrate diets. It said high production and employee costs contributed to its predicament.
Despite the lack of answers, Alvarez sounds optimistic about the company’s future.
‘‘Chapter 11 in this country is uniquely an American thing; it’s the idea of a second chance,’’ he said in an interview after the company filed for bankruptcy and he replaced CEO James Elsesser. ‘‘It’s where a company that has hit the wall is being given a chance to reorganize its affairs. A lot of good companies have come out of this.’’
Bankruptcy experts said a company’s chances of surviving Chapter 11 has a lot to do with how badly managed they were when they filed for protection.
Jeff Morris, a law professor at the University of Dayton in Ohio, said bankruptcies do the most good for companies that are relatively well-run but have financial problems, like crushing amounts of debt. Morris said a company with fundamental flaws in its operation or management will find little solace in bankruptcy court.
‘‘You can say, ’I don’t have to pay these debts,’’’ he said. ‘‘That doesn’t mean you can make Twinkies for cheaper tomorrow.’’
Matthew Will, a finance professor at the University of Indianapolis, went further, saying that the best plan for any company forced into bankruptcy, especially a business with well-known brands like Interstate, is to be sold quickly to a vibrant third party.
Such a sale can do much to preserve the company’s value and protect jobs and benefits, he said. But drawing out the bankruptcy process is likely to cause more harm.
‘‘Almost never does a company fully recover,’’ Will said, pointing to bankruptcies in the airline industry, where companies hang on by continually asking for deeper and deeper concessions from employees and vendors. ‘‘In the process of trying to recover, people get hurt, lose pensions, the banks throw good money after bad. Everyone eventually liquidates but they draw out the pain.’’
Interstate has been hurt by the popularity of diet plans like Atkins and South Beach, which have recently cut into its sales of white bread and snack cakes. But, Reilly said, the company had been teetering on the edge for years.
He said the company’s work force, more than 80 percent of which is covered by contracts with the Teamsters and a bevy of other unions, is too big, and many of its plants are out of date and inefficient.
‘‘Their labor situation has thrown them into a situation where they are not able to compete,’’ Reilly said. ‘‘They said a number of years ago that they needed to grow 2 to 3 percent a year to maintain their cost structure and they haven’t had any growth since 1998.’’
He also noted that other bakers, such as Flowers Foods of Thomasville, Ga., have flourished in recent years, largely by creating reduced-carb and premium breads to satisfy the changing marketplace. Interstate, on the other hand, didn’t release its reduced-carb and premium products until earlier this year.
In August, the company issued unaudited numbers for the fiscal year ending in May, saying it had lost $25.8 million, compared with a profit of $27 million the year before. Interstate said it had seen a 3.7 percent decrease in sales from the prior year. It has not said when it will issue an annual report, which was due Aug. 30, blaming the delay on an internal investigation into workers’ compensation reserves and computer problems.
The absence of information helped the company stumble into bankruptcy. After Interstate missed two deadlines to file the report, shareholders trashed its stock, forcing it from the teens to less than $5 a share. It dropped to $2.05 a share after the company filed for Chapter 11, but has almost doubled since, trading at about $4 — indicating that investors think the company will survive and prosper.
Some observers are also optimistic. Harlan Platt, a bankruptcy law professor at Northeastern University in Boston, said Interstate’s board had brought in ‘‘an A-plus guy’’ in Alvarez.
Platt said that between Interstate’ strong brands and Alvarez’s reputation for turning around companies — he helped revive Warnaco, a company that produces such brands as Calvin Klein and Speedo — the company would likely emerge from bankruptcy protection mostly intact and probably quicker than the average of two years.
Still, Platt said his optimism is limited by questions about some important issues — the workers’ compensation fund, not filing the annual report, failed experiments with bread — and how they were able to land Interstate in Chapter 11.
‘‘I think these were problems but it surprised me that they brought the company down,’’ he said, and wondered aloud, ‘‘Is there another shoe about to drop?’’