The Earthgrains Company (NYSE: EGR), the second-largest producer of packaged bread and bakery products in the United States, today reported fourth quarter fiscal 2001 earnings per diluted share of $0.13 on net income of $5.6 million. The results compare with year-ago fourth quarter earnings per diluted share of $0.26 on net income of $11.0 million, excluding the impact of a $5.4 million pretax write-off for a distributor's bankruptcy (all applicable comparisons below exclude the write-off).

For the full fiscal year 2001, Earthgrains had labor strike-impacted net income of $25.0 million, or earnings of $0.60 per diluted share, excluding unusual charges. A year ago, the company reported net income of $59.3 million, or earnings of $1.41 per diluted share, excluding unusual items. Revenue for the year increased by 26.6 percent to a record $2,582.1 million.

In the fourth quarter, which ended March 27, 2001, net sales increased by 25.1 percent to $597.2 million, driven primarily by the acquisition of Metz Baking Co. in the United States (March 2000). Without acquisition contributions, net sales excluding negative foreign-exchange impacts increased by 4.1 percent on strong contributions from Worldwide Refrigerated Dough Products and European Bakery Products.

Operating income and EBITDA were up 22.5 percent, while the company's operating and EBITDA margins were comparable to a year ago. Earthgrains had price and mix improvement across its operating divisions, including double-digit gains in superpremium product sales in domestic baking operations. Worldwide Refrigerated Dough Products posted significant operating margin improvement on strong sales volume and improved price and mix of products sold.

The year-over-year fourth quarter decline in earnings resulted from higher natural gas, fuel and electricity costs, higher employee-related costs, unfavorable foreign currency exchange rates, expected dilution from the acquisition of Metz Baking, including higher interest expense and increased goodwill amortization, and a higher effective tax rate.

"We finished a difficult year by re-establishing the momentum we need to return to the margins and growth trends we had before our domestic labor strike last summer," Earthgrains Chairman and CEO Barry H. Beracha said. "We remain very focused on overcoming challenges in order to further drive shareholder value, and the fourth quarter was an important transition toward getting us back on track to reach our performance goals. Our refrigerated- dough operations had an outstanding fourth quarter and an excellent last half of the year. On top of operational excellence, refrigerated-dough operations delivered very strong price, mix and volume performance, including contributions from new products, in the United States and Europe.

"In Worldwide Bakery Products, our European operations delivered double-digit sales growth and profitability improvement. In the United States, the Metz integration is on track, and we expect to continue capturing synergies this year with more to come next year. With last year's synergies in place and the additional synergies planned for this year, we expect to benefit from two-thirds of the integration's $30 million to $35 million in annual synergies this fiscal year. We are addressing the current business environment, particularly high fuel prices, by controlling costs, raising prices prudently, and by driving a higher-margin mix of products sold. We continue to deliver double-digit growth in the superpremium segment. Our consumer marketing initiatives are back on schedule, we have introduced new products and have more on the way, and we are continuing to roll out our Earth Grains superpremium products and our differentiated IronKids Bread in additional Metz territory.''

Fourth-quarter performance included (excluding the year-ago accounts receivable write-off in comparisons):

    * Net sales growth of 26.9 percent to $605.9 million, excluding a negative
      foreign exchange impact, up from $477.5 million a year ago.  After
      foreign exchange, net sales increased by 25.1 percent to $597.2 million.

    * Operating income increased by 22.5 percent to $29.4 million, up from
      $24.0 million a year ago.  Adjusting for the negative foreign exchange
      impact, the quarter's operating margin was 5.0 percent, the same as a
      year ago.

    * EBITDA cash flow (defined as earnings before interest expense, income
      taxes, depreciation, amortization, and minority interest expense)
      increased by 22.5 percent to $66.9 million, up from $54.6 million.

    * Interest expense increased to $17.7 million, up from $7.6 million, as a
      result of additional debt from financing the Metz Baking acquisition and
      higher interest rates.

Cash earnings decreased by 23.5 percent to $0.26 per diluted share from $0.34 per diluted share a year ago. The cash earnings measure represents net income before goodwill amortization (net of related income taxes). Goodwill amortization net of tax increased to $5.5 million, up from $3.2 million, as a result of the Metz Baking acquisition.

Fourth-Quarter Results Including Unusual Charges

In the year-ago fourth quarter ended March 28, 2000, Earthgrains recorded a $5.4 million pretax write-off for accounts receivable in relation to the bankruptcy of AmeriServe Food Distribution, Inc. ($3.4 million after-tax charge, or $0.08 per diluted share). Including the charge, net income in the year-ago quarter was $7.6 million, or $0.18 per diluted share.

Fourth Quarter -- Worldwide Bakery Products

Revenues for Worldwide Bakery Products, the larger of the company's two business segments, increased by 27.4 percent on the strength of acquisitions, and operating income growth of 3.9 percent was negatively impacted by higher fuel and energy costs and employee-related costs.

Operating income increased to $16.1 million from $15.5 million a year ago. Year-over-year higher fuel and energy costs were driven primarily by natural gas used to operate bakery ovens.

Net sales increased to $516.0 million from $405.1 million, driven primarily by the acquisition of Metz Baking in the United States. The results also include eight weeks of sales from the acquisition of the Ortiz toasted bread brand in Spain (approximately $12 million in annual revenue). Excluding the negative impact of foreign exchange, net sales for the segment increased by 29.0 percent.

Contributing positively to sales and operating income growth were enhanced price and mix of products sold, new-product contributions, and strong bread sales trends in Spain. Superpremium product sales in the United States, including sliced breads, hearth-baked loaves, artisan breads and shelf-stable bagels, increased by more than 10 percent.

Fourth Quarter -- Worldwide Refrigerated Dough Products

Earthgrains' Worldwide Refrigerated Dough products business segment delivered very strong results, including net sales growth of 12.2 percent and operating income growth of 42.9 percent.

Net sales for the segment increased to $81.2 million from $72.4 million a year ago, with double-digit growth in the United States and Europe. Excluding the impact of negative foreign-exchange rates, net sales increased by 15.3 percent. Primary contributors to growth were strong volume in both geographies, enhanced price and mix of products sold, and new-product contributions. In the United States, three new products -- Hearty Layers Biscuits, Jumbo Crescent Rolls and Break-n-Bake Style Cookies -- made strong contributions, and in Europe, continued expansion of convenience product lines such as pizza and dessert kits is contributing to growth.

Operating income increased to $16.0 million from $11.2 million a year ago. Favorable volume and mix of products sold were key drivers as revenue per pound increased and cost per pound decreased. In the United States, the higher-margin product categories of specialty biscuits, dinner rolls, sweet goods, cookie dough, and pie crusts all recorded double-digit sales growth.

Fiscal 2001 Full-Year Results (Excluding Unusual Items)

For the 52-week fiscal year that ended March 27, 2001, strike-impacted earnings, excluding unusual charges, were $0.60 per diluted share, compared with $1.41 per diluted share a year ago, excluding unusual items. Subsequent comparisons in this section and the business segment sections that follow exclude unusual items. The items are explained below in a separate section of this press release.

A 28-day domestic labor strike's impact to revenue and costs in the second and third quarters reduced earnings by an estimated $0.50 per diluted share. Excluding this impact, earnings would have been approximately $1.10 per diluted share.

Net income for the year was $25.0 million, compared with $59.3 million a year ago. In addition to the labor strike, net income was unfavorably impacted by higher fuel and energy costs, employee-related costs, foreign-exchange rates, a higher effective tax rate, and the expected dilution from the Metz Baking acquisition, including higher interest expense and increased goodwill amortization.

These impacts were partially offset by improved price and mix of products sold, lower ingredient costs, improved efficiencies, and strong performance in European baking and refrigerated-dough operations.

Cash earnings were down slightly from a year ago, excluding the estimated strike impact and other unusual items. Cash earnings were $1.67 per diluted share compared with $1.70 a year ago. The cash earnings measure represents net income before goodwill amortization charges (net of related income taxes).

    Performance in the fiscal year included:

    * On the strength of acquisitions, net sales increased by 26.6 percent
      to $2,582.1 million, up from $2,039.3 million a year ago.  Excluding
      unfavorable foreign exchange, net sales increased by 29.3 percent to
      $2,636.2 million.

    * Operating income increased by 4.3 percent to $122.9 million from
      $117.8 million.  Excluding impacts of the strike and foreign-exchange
      rates, operating income increased by 35.1 percent to $159.2 million.

    * EBITDA cash flow increased by 16.9 percent to $278.6 million from
      $238.3 million.  Excluding the impacts of the strike and
      foreign-exchange rates, EBITDA increased by 32.1 percent to
      $314.9 million for an EBITDA margin of 11.8 percent compared with
      11.7 percent a year ago.

Fiscal 2001 Full-Year Results -- Worldwide Bakery Products

Net sales for worldwide bakery operations increased primarily on acquisition contributions, while operating income was up slightly, impacted by the domestic labor strike in the second and third quarters, higher fuel and energy costs, higher employee-related costs, and unfavorable foreign-exchange rates.

Strike-impacted net sales increased by 30.3 percent to $2,274.4 million from $1,745.0 million a year ago. Excluding the unfavorable foreign-exchange impact, net sales increased by 32.7 percent. Contributing to sales growth were acquisitions -- Metz Baking in the United States and Reposteria Martinez and Ortiz in Spain -- and improved price and mix of products sold in both geographies, and strong bread sales in Spain.

Operating income was $86.1 million compared with $88.6 million a year ago. Excluding unfavorable foreign exchange, operating income increased slightly to $89.3 million with the benefits of enhanced product price and mix, lower ingredient costs and improved efficiencies offset by the impacts of the strike and higher fuel, energy and employee-related costs.

Fiscal 2001 Full-Year Results -- Worldwide Refrigerated Dough Products

Refrigerated-dough operations delivered strong results, including significant profit margin improvement on increased sales and operating income.

Net sales for the segment increased by 4.6 percent to $307.7 million, but excluding the unfavorable foreign-exchange impact, net sales increased by 8.8 percent. Contributors to growth included strong volume and improved pricing in the last half of the year in the United States, strong growth in Europe, acquisition benefits in Europe, and new-product contributions in both geographies.

Operating income increased by 18.6 percent to $48.4 million from $40.8 million a year ago. Excluding the foreign-exchange impact, operating income increased by 23.0 percent. Enhanced price and mix, higher volume and lower ingredient costs contributed to a 1.8 point operating margin improvement to 15.7 percent of sales, up from 13.9 percent a year ago.

Fiscal 2001 Full-Year Results Including Unusual Items

Including unusual items, Earthgrains reported net income of $12.4 million, or $0.30 per diluted share, compared with $54.5 million a year ago, or $1.30 per diluted share.

In the current year, Earthgrains reported pretax charges in the third quarter of $11.5 million for plant closings and $8.5 million for an accounts receivable write-off. The $11.5 million restructuring charge ($7.2 million after tax, or $0.17 per diluted share) was for fixed-asset write-offs, employee severance and benefits, and other related closing expenses associated with the shutdown of company bakeries in Des Moines, Iowa, and Louisville, Ky. The $8.5 million write-off ($5.4 million after tax, or $0.13 per diluted share) was taken to appropriately reflect the collectibility of accounts receivable based on a full review after the centralization of accounts receivable.

A year ago, Earthgrains took a fourth-quarter $5.4 million pretax write-off for accounts receivable in relation to the AmeriServe Food Service bankruptcy filing ($3.4 million after tax, or $0.08 per diluted share). In the third quarter a year ago, Earthgrains took a pretax restructuring charge of $2.3 million for costs associated with the closing of the Johnson City, Tenn., bakery ($1.4 million after tax, or $0.03 per diluted share).

Business Outlook

Earthgrains expects earnings of $1.50 to $1.65 per diluted share for fiscal year 2002, in line with previous guidance. The guidance compares with the $1.10 per diluted share earned in fiscal 2001, excluding unusual items and an estimated $0.50 per share impact from a 28-day domestic labor strike. In fiscal year 2000, Earthgrains earned $1.41 per diluted share, excluding unusual charges.

Fiscal 2002's earnings breakdown by quarter are generally expected to approach seasonal trends similar to fiscal 2000, a year that was not impacted by a domestic labor strike. At this time, the company estimates earnings for the first quarter of fiscal 2002 to be in the range of $0.26 to $0.30 per diluted share. That compares with $0.27 per diluted share in the first quarter of fiscal 2001.

"We feel positive about the momentum we established in the fourth quarter heading into the new fiscal year," Beracha said. "Sales growth, product mix, acquisition integration, quality enhancement, and cost control are all key efforts. We are continuing to make progress on our improvement plans outlined last quarter. We have resumed our consumer-targeted marketing and advertising, we continue to roll out new products, we are identifying new business to capture, we are successfully enhancing price and mix, and we are evaluating continued enhancement of selling and manufacturing efficiencies, including additional route and manufacturing consolidation opportunities."

The continued integration of Metz Baking will also be a key driver of performance in fiscal 2002. In fiscal 2002, Earthgrains expects to achieve a cumulative 60 percent to 70 percent of the integration's $30 million to $35 million of annual cost-reduction and improvement synergies. The full annual synergies will be realized in fiscal year 2003. Earthgrains expects to have all the bakeries acquired with Metz converted to its business systems by October 2001.

Earthgrains has a medium-term goal to achieve an EBITDA margin of 13 percent to 15 percent while achieving return on capital employed above its cost of capital. The company's medium-term incentive program, which is tied to EBITDA margin, annual sales growth, and return on capital employed, will conclude at the end of fiscal year 2003, six months beyond the date originally anticipated.

"We want to create shareholder value by driving our EBITDA margin and sales growth consistent with well-managed mid-cap food companies," Beracha said. "These goals are in sight, and we will work diligently to reach sustainable performance toward the top of the target range of 13 percent to 15 percent EBITDA margin."

Earthgrains' current priorities for cash continue to be debt reduction, investing in its business, and paying modest dividends. Other company expectations for fiscal 2002, which are consistent with previous guidance, include:

     * Net sales of approximately $2.7 billion.

     * EBIT (earnings before interest expense, and income taxes) of
       approximately $185 million to $195 million.

     * EBITDA cash flow of approximately $330 million to $345 million.

     * Capital spending of $105 million to $115 million.  Approximately
       two-thirds of the investment will be in high-return projects.

About Earthgrains

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 .

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.

EBITDA and cash earnings per diluted share are used in this press release and attached statements 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.

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.

                           THE EARTHGRAINS COMPANY
                            Statements of Earnings
                     (In millions except per share data)
                                 (Unaudited)

                       12-week period ended         52-week period ended
                   March 27, March 28, Percent  March 27, March 28, Percent
                     2001      2000    Change     2001      2000    Change

    Net Sales       $597.2    $477.5    25.1%   $2,582.1  $2,039.3   26.6%

    Cost of
     Products Sold   325.1     258.5             1,407.7   1,122.5

    Gross Profit     272.1     219.0    24.2%    1,174.4     916.8   28.1%

    Marketing,
     Distribution and
     Administrative
     Expenses        242.7     200.4             1,060.0     804.4
    Provision for
     Restructuring and
     Consolidation      --        --                11.5       2.3

    Operating Income  29.4      18.6    58.1%      102.9     110.1   (6.5)%

    Other Income and
    Expenses:
    Interest expense (17.7)     (7.6)              (76.8)    (26.5)
    Other income
     (expense), net    1.5       1.1                 3.5       4.3

    Income before
     Income Taxes     13.2      12.1     9.1%       29.6      87.9  (66.3)%

    Provision for
     Income Taxes      7.4       4.4                16.4      32.8
    Minority Interest
     Expense          (0.2)     (0.1)               (0.8)     (0.6)

    Net Income        $5.6      $7.6   (26.3)%     $12.4     $54.5  (77.2)%

    Earnings Per Share:
    Basic
     Net Earnings    $0.14     $0.19   (26.3)%     $0.30     $1.34  (77.6)%
     Weighted
      Average Shares
      Outstanding     41.1      40.6                40.7      40.6

    Diluted
     Net Earnings    $0.13     $0.18   (27.8)%     $0.30     $1.30  (76.9)%
     Weighted
      Average Shares
      Outstanding     41.9      41.5                41.7      41.9


    Excluding
    Unusual Items:     12-week period ended        52-week period ended
                   March 27, March 28, Percent  March 27, March 28, Percent
                     2001      2000    Change     2001      2000    Change
    Operating
     Income (a)     $29.4     $24.0     22.5%    $122.9    $117.8     4.3%
    Net Income (a)   $5.6     $11.0    (49.1)%    $25.0     $59.3   (57.8)%
    Earnings per
     Diluted
     Share (a)      $0.13     $0.26    (50.0)%    $0.60     $1.41   (57.4)%
    EBITDA (a)      $66.9     $54.6     22.5%    $278.6    $238.3    16.9%
    Goodwill
     Amortization,
     net of tax      $5.5      $3.2     71.9%     $23.6     $11.8   100.0%
    Goodwill
     Amortization,
     net of tax, per
     diluted share  $0.13     $0.08     62.5%     $0.57     $0.28   103.6%
    Cash Earnings
     per Diluted
     Share (a)      $0.26     $0.34    (23.5)%    $1.17     $1.70   (31.2)%

    (a) For fiscal 2001, excludes the $8.5 million pretax accounts receivable
        write-off and the $11.5 million pretax provision for restructuring and
        consolidation in the 52-week period.  For the year ago periods,
        excludes the $5.4 million pretax write-off related to the bankruptcy
        filing of Ameri-Serve Food Distribution, Inc., in the fourth quarter
        and 52-week period, and the $2.3 million pretax provision for
        restructuring and consolidation in the 52-week period.


                           THE EARTHGRAINS COMPANY
                         Business Segment Information
                                (In millions)
                                 (Unaudited)

                       12-week period ended         52-week period ended
                   March 27, March 28, Percent  March 27, March 28, Percent
                    2001      2000    Change     2001      2000    Change

    Income Statement
     Information
    Net Sales
     Bakery
      Products      $516.0     $405.1   27.4%   $2,274.4   $1,745.0  30.3%
     Refrigerated
      Dough Products  81.2       72.4   12.2%      307.7      294.3   4.6%
     Total          $597.2     $477.5   25.1%   $2,582.1   $2,039.3  26.6%

    Operating Income
     Bakery
      Products       $16.1      $10.1   59.4%      $66.1      $80.9 (18.3)%
     Refrigerated
      Dough Products  16.0       11.2   42.9%       48.4       40.8  18.6%
     Corporate (a)    (2.7)      (2.7)   0.0%      (11.6)     (11.6)  0.0%
     Total           $29.4      $18.6   58.1%     $102.9     $110.1  (6.5)%

    Operating Income
    (Excluding
     unusual items)
     Bakery
      Products (b)   $16.1      $15.5    3.9%      $86.1      $88.6  (2.8)%
     Refrigerated
      Dough Products  16.0       11.2   42.9%       48.4       40.8  18.6%
     Corporate (a)    (2.7)      (2.7)   0.0%      (11.6)     (11.6)  0.0%
     Total (b)       $29.4      $24.0   22.5%     $122.9     $117.8   4.3%

    Operating Margin
    (Excluding
     unusual items)
     Bakery
      Products (b)     3.1%       3.8%    --         3.8%       5.1%   --
     Refrigerated
      Dough Products  19.7%      15.5%    --        15.7%      13.9%   --
     Total (b)         4.9%       5.0%    --         4.8%       5.8%   --

    Depreciation
     & Amortization
     Bakery Products $29.4      $22.1   33.0%     $124.0      $88.1  40.7%
     Refrigerated
      Dough Products   3.9        4.7  (17.0)%      16.6       16.5   0.6%
     Corporate (a)     2.7        2.7    0.0%       11.6       11.6   0.0%
     Total           $36.0      $29.5   22.0%     $152.2     $116.2  31.0%

    Balance Sheet
     Information
    Capital Expenditures
     Bakery Products $20.6      $27.7  (25.6)%     $84.3      $76.7   9.9%
     Refrigerated
      Dough Products   3.6        3.7   (2.7)%      12.4       17.4 (28.7)%
     Total           $24.2      $31.4  (22.9)%     $96.7      $94.1   2.8%

    (a) Amounts represent purchase accounting valuation in conjunction with
        the acquisition of the Company by Anheuser-Busch Companies, Inc., in
        1982 and the related depreciation and amortization thereon.

    (b) For fiscal 2001, excludes the $8.5 million pretax accounts receivable
        write-off and the $11.5 million pretax provision for restructuring and
        consolidation in the 52-week period.  For the year ago periods,
        excludes the $5.4 million pretax write-off related to the bankruptcy
        filing of AmeriServe Food Distribution, Inc., in the fourth quarter
        and 52-week period, and the $2.3 million pretax provision for
        restructuring and consolidation in the 52-week period.