The Earthgrains Company (NYSE: EGR) was discussing yesterday its fiscal year 2001 and fiscal year 2002 financial and performance goals.

Earthgrains Chairman and CEO Barry H. Beracha is scheduled to make a presentation at 1:30 p.m. EST today to investors and securities analysts at the UBS Warburg Food, Beverage and Household Products Conference in New York. Details on how to access the presentation live via telephone or webcast are listed later in this press release.

"We are in an important foundation year in our efforts to move from being the best in the baking business to being a peer performer of well-managed mid-cap food companies," Beracha said. "We are pleased with our progress this year despite challenging circumstances, including a labor strike. We are getting core business improvement and growth that are partially offsetting expected acquisition dilution. We continue to have strong cash flow, our debt reduction is on target, and we expect full recovery from the strike by the end of the current third quarter."

Earthgrains, the second-largest packaged bread producer in the United States serving about 50 percent of the population, operates fresh-bakery and refrigerated-dough businesses in the United States and Europe. In its U.S. bread and bakery operations, Earthgrains has the No. 1 or No. 2 market share in 24 of 27 sales zones.

Earthgrains reaffirmed its confidence in achieving performance targets under its medium-term incentive program, which ends in September 2002. The targets are: average annual sales growth over the previous three years of more than 5 percent (up to 10 percent) and an EBITDA margin of at least 13 percent (up to 15 percent), with return on capital employed (ROCE) above the cost of capital.

"Achieving these goals is an important element to driving shareholder value," Beracha said. "We want to drive performance to show that consistent improvement and even higher profitability are mainstays of Earthgrains. We feel confident that we can reach these targets, and we are working hard to reach the top of the target range."

Earthgrains reiterated its goal to achieve earnings per diluted share of $1.34 to $1.39, excluding the strike impact, in fiscal 2001, which ends March 27, 2001. The goal is consistent with analyst estimates.

Earthgrains anticipates net sales of $2.6 billion in fiscal 2001. Capital investment for the year is estimated to be $110 million to $115 million, or 4.2 percent of projected sales, compared with $94 million last year, or 4.6 percent of sales. Priorities for cash continue to be debt reduction, capital investment, paying modest dividends, and making opportunistic share repurchases.

For fiscal year 2002, the company's goals, which are consistent with current analyst consensus estimates, include:
  • Net sales of $2.7 billion.

  • EBIT (earnings before interest expense and income taxes) of $195 million to $205 million.

  • EBITDA (earnings before interest expense, income taxes, depreciation, amortization, and minority interest expense) of $350 million to $360 million.

  • 25 percent or more growth in earnings per diluted share over fiscal 2001 earnings levels excluding the strike impact.

  • Capital investment is estimated to be $120 million to $125 million, or about 4.5 percent of projected sales.
The drivers of fiscal 2002 performance are expected to be full recovery from strike-related impacts; core revenue growth of between 2.5 percent to 3.5 percent; acquisition benefits from the integrations of Metz Baking Co. in the United States and Reposteria Martinez in Spain; fundamental business improvement through the use of information technology, brand building and cost reduction; and lower interest expense. The company estimates having an effective tax rate of approximately 42 percent in fiscal 2002.

The Metz integration is proceeding as planned and cost-reduction and synergy benefits are being captured as scheduled. The rollout of Earthgrains' systems began last month and is scheduled to be completed in September 2001. The company remains highly confident it will capture $30 million to $35 million in annual synergy benefits in the areas of general and administrative costs, purchasing benefits, production and route consolidation, and other cost reductions. The company expects to achieve 10 percent to 15 percent of the savings in fiscal 2001, 50 percent to 55 percent in fiscal 2002, and the remaining savings in fiscal 2003.

In Europe, Earthgrains has completed the integration of packaged baked sweet-goods producer Reposteria Martinez and expects benefits, including enhanced selling and distribution efficiencies, to continue in fiscal 2002. Earthgrains is the market-share leader in Spain for bread and buns and packaged sweet goods. Category sales growth for bread and buns in Spain is approximately 6 percent to 8 percent this year, up from 1 percent to 3 percent last year. Pricing, product mix and marketing efforts are driving growth.

In the United States, sales growth and pricing trends for bread, buns and rolls remain positive. In Earthgrains' territory, the retail price per pound for branded fresh bread increased by 5.7 percent to $1.41 for the 52-week period ended Sept. 24, according to Information Resources Inc. (IRI). Retail dollar sales for fresh bread, buns and rolls, including private label, in Earthgrains' territory increased by 4.5 percent on flat volume, according to IRI. Dollar-sale increases by segment were: superpremium, 6.1 percent; premium, 5.9 percent; popular, 5.3 percent; and private label, 1.9 percent.

About Earthgrains

Earthgrains, which had sales of $2.039 billion in fiscal 2000, 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 with 64 bakeries. Major company-owned brands include Colonial, Rainbo, IronKids, Earth Grains, Grant's Farm, 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 11 bakeries in Spain (including the Canary Islands) and Portugal. Major brands include Bimbo, Silueta, Semilla de Oro and Martinez.

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 and Raulet brands 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.

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 raw material prices; 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; the impact of the European monetary union; and other factors.

EBITDA and cash earnings per diluted share are used in this press release because they are financial indicators of cash-generation capability. EBITDA is not the same as income from operations or cash flow from operating activities, and cash earnings per diluted share is not the same as earnings per diluted share as determined in accordance with generally accepted accounting principles. EBITDA margin is expressed as a percentage of net sales and is one component of the vesting and payout provisions in the Company's medium-term incentive program.

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.