For more information,
Investor contact - Molly Salky 314/259-7018
Media contact - Matt Hall 314/259-7223
FOR IMMEDIATE RELEASE
EARTHGRAINS COMPANY EXPECTS TO REPORT
1st-QUARTER EARNINGS HIGHER THAN CONSENSUS ESTIMATES
COMPANY ALSO EXPECTS TO ADOPT NEW FASB RULE RELATING TO
ACCOUNTING FOR GOODWILL BEGINNING WITH THE 1ST QUARTER
ST. LOUIS, July 2, 2001 - The Earthgrains Company (NYSE: EGR) today
announced that it expects to report diluted earnings per share for the first
quarter of fiscal year 2002 that are above the consensus of analyst expectations
as a result of stronger than expected operating results, including strong
refrigerated dough and superpremium bread sales.
Earthgrains expects first-quarter earnings per diluted share to be
approximately $0.34, compared with the analyst consensus of $0.28 per share. A
year ago, Earthgrains reported first-quarter earnings of $0.27 per diluted
share.
Earthgrains, the second-largest packaged fresh bread baker in the United
States and maker of Earth Grains and IronKids breads, is scheduled to release
results Tuesday, July 10, 2001, before the New York Stock Exchange opens for
trading. The 12-week quarter ended June 19, 2001.
In May, Earthgrains gave public guidance on first-quarter earnings,
estimating that earnings would be in the range of $0.26 to $0.30 per diluted
share. The better than expected performance was driven by:
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- Strong results for Worldwide Refrigerated Dough Products. Double-digit
sales growth and strong margin improvement was fueled by increased
volume, enhanced price and mix of products sold, and successful new
products. In the United States, where Earthgrains is the only store-
brand supplier of canned refrigerated dough, Earthgrains increased its
dollar share of the category. Earthgrains outperformed the category in
every product segment, including double-digit growth in the higher-
margin product areas of specialty biscuits, sweet goods, dinner breads
and cookie dough.
- On-target profitability for Worldwide Bakery Products, Earthgrains'
larger business segment, despite higher energy costs. In the United
States, enhanced price and mix of products sold, including double-digit
sales growth for superpremium bread and bakery products, helped drive
results. In Europe, improved bread volume and new products contributed
to results.
Planned Adoption of Goodwill Accounting Statement
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Earthgrains plans to adopt a new statement expected to be issued by the
Financial Accounting Standards Board (FASB) regarding changes in accounting for
goodwill, which will result in higher reported earnings per diluted share. The
company plans to adopt the new goodwill accounting practice beginning with the
first quarter's results, provided that the final statement has provisions
similar to the draft and provided that the FASB issues the statement, as
expected, prior to Earthgrains' Aug. 3, 2001, deadline to file the company's 10Q
quarterly report with the Securities and Exchange Commission. If the statement
is issued after the quarterly deadline, Earthgrains will be precluded from
adopting the accounting practice until fiscal year 2003.
The new FASB standard, "Business Combinations and Intangible Assets -
Accounting for Goodwill," would eliminate the amortization of goodwill and
instead require an annual review of goodwill for impairment or a review when a
change or event occurs that indicates goodwill may be impaired. Under the new
FASB standard, goodwill amortization would be eliminated, resulting in an
increase in reported earnings per diluted share approximately equal to the
goodwill amortization, net of tax, per share.
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In fiscal 2001, Earthgrains reported goodwill amortization, net of tax,
totaling $23.6 million, which reduced earnings per diluted share by $0.57. In
fiscal 2002, the company expects annual goodwill amortization, net of tax, of
approximately $24.0 million. Under the proposed new standard, Earthgrains'
fiscal 2001 fully diluted earnings per share would have been $1.67 versus the
reported earnings of $1.10 (excluding all unusual items and the estimated impact
of a domestic labor strike).
The estimated impact of the new FASB standard on first quarter fiscal 2002
earnings is $5.6 million net of tax, or $0.13 per diluted share. Adoption of
the new standard would result in expected first-quarter earnings of
approximately $0.47 per diluted share, compared with $0.40 a year ago.
Fiscal 2002 Outlook
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In light of expected first-quarter earnings, Earthgrains has revised its
expectations of earnings for fiscal year 2002 to $1.55 to $1.65 per diluted
share, excluding the impact of the FASB rule change for goodwill accounting.
Including the FASB rule change, earnings are expected to be $2.12 to $2.22 per
diluted share. In May, Earthgrains' guidance for fiscal 2002 earnings was $1.50
to $1.65 per diluted share (or $2.07 to $2.22 when including the FASB
rule-change impact).
While narrowing the range of expected earnings for the year, Earthgrains
notes that actual results will depend on performance in its seasonally strong
second and third quarters as well as risk from foreign-exchange rates and
energy-related costs.
First Quarter Earnings Release and Analyst Conference Call
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Earthgrains will announce results for the first quarter on July 10, 2001,
before the New York Stock Exchange opens. An analyst conference call will be
held at 10 a.m. EDT that day to discuss results, future earnings guidance and
company outlook.
The analyst conference call will be broadcast live via the Internet and is
available to the general public. Interested shareholders, investors and
consumers may listen to the broadcast by visiting the Earthgrains corporate Web
site, www.earthgrains.com. The webcast will also be archived and will be
accessible through the Web site.
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About Earthgrains
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Earthgrains, which had sales of nearly $2.6 billion in fiscal 2001,
operates fresh-bakery and refrigerated-dough businesses in the United States and
Europe.
Earthgrains is the second-largest producer of fresh packaged bread and
baked goods in the United States, operating 61 bakeries. Major company-owned
brands include Earth Grains, IronKids, Grant's Farm, Colonial, Rainbo, San Luis
Sourdough, Heiner's, Master, Mother's, Old Home, and Break Cake. Major
franchise brands include Sunbeam, Country Hearth, Roman Meal, D'Italiano,
Taystee, Holsum, Healthy Choice, Pillsbury, Mickey, and Sun*Maid.
In Europe, Earthgrains is the market-share leader for fresh packaged sliced
bread, buns and packaged sweet goods in Spain and is one of the largest
producers of bread and buns in Portugal. Earthgrains has 12 bakeries in Spain
(including the Canary Islands) and Portugal. Major brands include Bimbo,
Silueta, Semilla de Oro, Martinez, and Ortiz.
In the refrigerated-dough segment, Earthgrains is the only manufacturer of
store-brand canned refrigerated-dough products in the United States and is one
of the largest producers of store-brand toaster pastries. The company has two
domestic refrigerated-dough plants and also markets products under its Merico
brand. In Europe, Earthgrains is the largest refrigerated-dough producer in
France and the only producer of canned dough in Europe. The company operates
four plants in France and markets canned and rolled refrigerated-dough products
under the CroustiPate brand in France and via customer brands throughout Western
Europe.
More information about Earthgrains may be found on the company's corporate
Internet web site at www.earthgrains.com.
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CAUTIONARY NOTE: To provide the clearest possible description of Earthgrains'
business and outlook, this report contains forward-looking statements based on
Earthgrains' best current information and reasonable assumptions about
anticipated developments. However, because of the risks and uncertainties that
always exist in any operating environment or business, Earthgrains cannot make
any assurances that these expectations will prove correct. Actual results and
developments may differ materially, depending upon prices of raw materials,
fuel, commodities and other goods purchased; the ability of the Company to
realize projected savings from productivity and product-quality improvements;
the ability of the Company to continue to participate in industry consolidation
and to successfully integrate acquired businesses; labor costs and labor
relations; legal proceedings to which the Company may become a party;
competitive pricing; economic conditions in the Company's countries of
operations, including currency values and interest rates; and other factors.
Further information on factors that could affect Earthgrains' financial and
other results is included in the Company's filings with the Securities and
Exchange Commission.