The Earthgrains Company (NYSE: EGR) announced today that earnings for the second quarter will fall below analyst expectations because of strike-related costs and revenue impacts.
Earthgrains continued operating bakeries and serving markets during the strike to protect customer relationships, incurring significant incremental costs for overtime, temporary labor, security, travel, purchased goods, and transportation and distribution. The strike impact is expected to lower earnings by approximately $0.13 per diluted share in the quarter that ended Sept. 12, 2000.
The range of earnings estimates for the quarter, excluding the strike impact, is $0.32 to $0.36 per diluted share. Before the strike, Earthgrains was performing according to plan, and earnings were projected to have been within the range of analyst estimates. The integration of the Metz Baking Co. operations acquired in March 2000 continues on track.
The strike, which began Aug. 26 in Fort Payne, Ala., ended Sept. 22 with the ratification of a new three-year agreement. Employees engaged in work stoppages at 23 bakeries for all or part of 18 days in the second quarter. Those bakeries and an additional four bakeries were impacted from one to 10 days in the 16-week third quarter, which ends Jan. 2, 2001. Incremental spending for strike-related expenses substantially ended Sept. 25.
Earthgrains focused on continued service to markets and protection of customer relationships during the strike, resulting in significant one-time costs but positioning the company to resume business improvement plans. Continued operation of all but two of the 27 impacted bakeries during the work stoppage is helping the company more quickly return to pre-strike service and production levels.
Earthgrains will proceed with its business improvement plans for the second half of fiscal year 2001 and for fiscal year 2002, including acquisition integration in the United States and Europe, use of information technology, control and reduction of costs, and improvement of product mix through additional premium and super-premium products.
Earthgrains is scheduled to report second-quarter results before the stock market opens on Tuesday, Oct. 3, 2000. The company plans to provide further information regarding the strike impact at that time.
Earthgrains operates fresh-bakery and refrigerated-dough businesses in the United States and Europe. The company is the second-largest packaged bread and baked goods producer in the United States with 64 bakeries in the South, Southeast, Midwest, Upper Midwest, Southwest and West.
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.
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.