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Earthgrains Co/DE – ‘10-Q’ for 9/12/00

On: Thursday, 10/26/00, at 12:12pm ET · For: 9/12/00 · Accession #: 891118-0-500003 · File #: 0-27426

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

10/26/00  Earthgrains Co/DE                 10-Q        9/12/00    2:31K                                    Stolar Partnership

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      15     56K 
 2: EX-27       Financial Data Schedule                                2±     8K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Changes in Securities. None Defaults Upon Senior Securities. None Exhibits and Reports on Form 8-K Legal Proceedings. The Company has no legal proceedings which have become a reportable event in the current period Other Information. None Submission of Matters to a Vote of Security-Holders. No matters were submitted to a vote of security holders
1	1st Page - Filing Submission
14	Item 1. Legal Proceedings. The Company has no legal proceedings which have become a reportable event in the current period
"	Item 2. Changes in Securities. None
"	Item 3. Defaults Upon Senior Securities. None
"	Item 4. Submission of Matters to a Vote of Security-Holders. No matters were submitted to a vote of security holders
"	Item 5. Other Information. None
"	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 15 TOC ↑Top Previous Next ↓Bottom Just 1st
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q 

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarter Ended September 12, 2000

Commission file number 1-7554 

 THE EARTHGRAINS COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE                           36-3201045       
(State or other jurisdiction of           (I.R.S. Employer                
incorporation or organization)           Identification No.)              

8400 Maryland Avenue, St. Louis, Missouri     63105               
(Address of Principal Executive Offices)      (Zip)               

314-259-7000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was     
required to file such reports), and (2) has been subject to such filing         
requirements for the past 90 days.                                              
Yes [X ]  No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of    
common stock, as of the latest practicable date.                                

$.01 Par Value Common Stock - 42,389,026 shares 
as of October 10, 2000                          

10-Q 2nd Page of 15 TOC 1st Previous Next ↓Bottom Just 2nd
THE EARTHGRAINS COMPANY 

Index 

                            Page No.
                            --------

Part I.   FINANCIAL INFORMATION                                                 

Condensed Consolidated Balance Sheets       2               

Condensed Consolidated Statements of                        
Earnings                                    3               

Condensed Consolidated Statements of                        
Cash Flows                                  4               

Notes to Condensed Consolidated                             
Financial Statements                        5               

Management's Discussion and Analysis                        
of Financial Condition and Results                          
of Operations                               9               

Part II.  OTHER INFORMATION                                                     

Other Information                           13              

Exhibits and Reports on Form 8-K            13              

10-Q 3rd Page of 15 TOC 1st Previous Next ↓Bottom Just 3rd
                                                                [Download Table]
                     THE EARTHGRAINS COMPANY                          
              Condensed Consolidated Balance Sheets                   
                          (In millions)                               
                           (Unaudited)                                


                                          Sept. 12,    March 28,      
                                            2000         2000         
                                          ---------    ---------      
                                                                      
Assets                                                                
Current assets:                                                       
   Cash and cash equivalents              $   18.5     $   19.9       
   Accounts receivable, net of allowance                              
    for doubtful accounts of $3.8            270.0        261.3       
   Inventories                                97.5         91.5       
   Deferred income taxes and other           111.0        108.6       
                                          --------     --------       
        Total current assets                 497.0        481.3       
Other assets, net                             41.0         42.4       
Goodwill, net                                890.2        900.0       
Plant and equipment, net                     894.4        915.8       
                                          --------     --------       
        Total assets                      $2,322.6     $2,339.5       
                                          ========     ========       

Liabilities and Shareholders' Equity                                  
Current liabilities:                                                  
   Current maturities of long-term debt   $   17.2     $  442.1       
   Accounts payable                          169.1        177.9       
   Accrued salaries, wages and benefits       72.7         83.3       
   Accrual for restructuring and                                      
    consolidation                             12.7         17.0       
   Other current liabilities                  90.5        107.7       
                                          --------     --------       
        Total current liabilities            362.2        828.0       

Postretirement benefits                      105.5        104.1       
Long-term debt                               982.7        562.3       
Deferred income taxes                        129.0        117.6       
Other noncurrent liabilities                  73.1         62.6       
Commitments and contingencies                   --           --       
Minority interest-mandatorily redeemable                              
 preferred stock of subsidiary                10.0         10.0       
Shareholders' equity                                                  
   Common stock                                0.4          0.4       
   Additional paid-in capital                623.7        621.6       
   Retained earnings                         141.0        125.8       
   Unearned ESOP shares                       (9.6)       (11.0)      
   Treasury stock                            (39.1)       (35.8)      
   Unearned portion of restricted stock       (1.0)        (1.6)      
   Accumulated other comprehensive income    (55.3)       (44.5)      
                                          --------     --------       
        Shareholders' equity                 660.1        654.9       
                                          --------     --------       
           Total liabilities and                                      
            shareholders' equity          $2,322.6     $2,339.5       
                                          ========     ========       

<FN>                                                                  
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>                                                                 

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                                                                [Download Table]
                        THE EARTHGRAINS COMPANY                       
             Condensed Consolidated Statements of Earnings            
                  (In millions except per share data)                 
                             (Unaudited)                              


                         12-week period ended    24-week period ended 
                         --------------------    -------------------- 
                         Sept. 12,  Sept. 14,    Sept. 12,  Sept. 14, 
                           2000       1999         2000       1999    
                           ----       ----         ----       ----    
                                                                      
Net sales                 $603.2     $469.4       $1,202.8   $919.0   

Cost of products sold      325.6      260.6          645.4    508.3   
                          ------     ------       --------   ------   

Gross profit               277.6      208.8          557.4    410.7   

Marketing, distribution                                               
 and administrative                                                   
 expenses                  242.7      178.5          487.5    355.6   
                          ------     ------       --------   ------   

Operating income            34.9       30.3           69.9     55.1   

Other income and expenses:                                            
   Interest expense        (18.2)      (5.5)         (34.0)   (11.0)  
   Other income (expense),                                            
    net                      0.7        0.8            0.7      1.7   
                          ------     ------       --------   ------   

Income before income                                                  
 taxes                      17.4       25.6           36.6     45.8   

Provision for income                                                  
 taxes                       8.3        9.7           16.4     17.3   
Minority interest                                                     
 expense                    (0.2)      (0.2)          (0.4)    (0.3)  
                          ------     ------       --------   ------   

Net income                  $8.9      $15.7          $19.8    $28.2   
                            ====      =====          =====    =====   

Earnings per share:                                                   
   Basic                                                              
      Net earnings          $0.22      $0.39          $0.49    $0.70  
                            =====      =====          =====    =====  
      Weighted average                                                
       shares outstanding   40.4       40.6           40.4     40.5   
                            ====       ====           ====     ====   

   Diluted                                                            
      Net earnings          $0.21      $0.37          $0.48    $0.67  
                            =====      =====          =====    =====  
      Weighted average                                                
       shares outstanding   41.7       42.1           41.4     42.1   
                            ====       ====           ====     ====   

<FN>                                                                  
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>                                                                 

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                                                                [Download Table]
                         THE EARTHGRAINS COMPANY                      
              Condensed Consolidated Statements of Cash Flows         
                              (In millions)                           
                               (Unaudited)                            


                                           For the 24-week            
                                            period ended              
                                        ---------------------         
                                        Sept. 12,   Sept. 14,         
                                          2000        1999            
                                        ---------   ---------         
                                                                      
Cash flow from operating activities:                                  
   Net income                            $ 19.8      $ 28.2           
   Adjustments to reconcile earnings                                  
    to net cash flow provided by                                      
    operations:                                                       
       Depreciation and amortization       68.5        50.6           
       Deferred income taxes               11.7        (0.4)          
   (Gain) on disposal of fixed assets      (0.2)       (0.3)          
   Changes in noncash working capital     (44.1)      (30.4)          
   Other, net                              12.2       (13.2)          
                                         ------      ------           
       Net cash flow from operations       67.9        34.5           
                                         ------      ------           
Cash flows from investing activities:                                 
   Capital expenditures                   (45.5)      (34.3)          
   Acquisitions, net of cash acquired     (11.9)      (18.4)          
   Other, net                               1.0         4.5           
                                         ------      ------           
       Net cash used by investing                                     
        activities                        (56.4)      (48.2)          
                                         ------      ------           
Cash flows from financing activities:                                 
   Net (payments on) proceeds from                                    
    borrowings                           (542.9)        6.8           
   Issuance of long-term debt             538.4          --           
   Dividends to shareholders               (4.6)       (3.7)          
   Purchases of treasury stock             (3.3)      (10.9)          
   Other                                    0.5         1.3           
                                         ------      ------           
       Net cash used by financing                                     
        activities                        (11.9)       (6.5)          
                                         ------      ------           
Effect of exchange rate changes on                                    
 cash                                      (1.0)       (2.3)          
Net (decrease) in cash and cash                                       
 equivalents                               (1.4)      (22.5)          
Cash and cash equivalents, beginning                                  
 of period                                 19.9        53.1           
                                         ------      ------           
Cash and cash equivalents, end of                                     
 period                                  $ 18.5      $ 30.6           
                                         ======      ======           

<FN>                                                                  
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>                                                                 

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Notes to Condensed Consolidated Financial Statements                            
----------------------------------------------------                            

Note 1 - In the opinion of the Company, the accompanying unaudited condensed    
consolidated financial statements contain all adjustments (consisting of only   
normal recurring adjustments) necessary for a fair presentation of the financial
statements pursuant to the applicable SEC rules and guidelines pertaining to    
interim financial information.  Operating results for any quarter are not       
necessarily indicative of the results for any other quarter or for the full     
year.  These condensed consolidated financial statements should be read in      
conjunction with the consolidated financial statements and notes thereto        
included in the Annual Report to Shareholders for the year ended March 28, 2000.

Note 2 - Inventories are carried at the lower of cost or market.  Cost is       
determined under the first-in, first-out method.                                

Total inventories consisted of the following:                                   

  Sept. 12,    March 28,
 2000         2000
  ---------    ---------

Raw materials      $ 69.8       $ 68.3                  
Finished goods       27.7         23.2                  
 ------       ------

 $ 97.5       $ 91.5
 ======       ======

Note 3 - The Company has recorded various provisions for restructuring and      
consolidation in conjunction with closing domestic bakeries and restructuring   
operations in Spain in order to increase efficiencies and streamline operations.
Reserves have also been established in conjunction with certain acquisitions    
for restructuring related to the acquiree's operations.  In accordance with     
generally accepted accounting principles, the acquisition-related reserves were 
recorded as an increase to goodwill and no provision was recorded.  These       
provisions and reserves include costs of reflecting certain fixed assets at net 
realizable value less cost of disposal, employee severance benefits, and other  
related closing costs that do not benefit future periods.                       

No such provisions or additional reserves were recorded during the current      
quarter.  The reserve balance at September 12, 2000 is comprised primarily of   
severance yet to be paid.  A reconciliation of activity with respect to the     
Company's restructuring and consolidation since fiscal year 2000 is as follows: 

Ending balance, March 28, 2000               $17.0                        
Cash payments associated with severance        2.8                        
                     -----
Ending balance, June 20, 2000                 14.2                        
Cash payments associated with severance        1.5                        
                     -----
Ending balance, September 12, 2000           $12.7                        
                     =====

Note 4 - Effective March 18, 2000, the Company acquired the stock of Metz Baking
Company for $625 million.  Metz, which operates 21 bread and specialty bakeries,
added major markets                                                             

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and brands in the upper Midwest.  The acquisition was initially financed through
new and existing committed credit facilities and commercial paper.              

Effective June 30, 1999, Earthgrains acquired the stock of Patrick Raulet, S.A.,
a leading producer of refrigerated dough products in Dole, France.  This        
acquisition complements the Company's existing European Refrigerated Dough      
Products business, making it the largest refrigerated dough supplier in France. 
This acquisition was funded through the cash flows of the local existing        
operations.                                                                     

Both acquisitions were purchased for cash and have been accounted for using the 
purchase method.  Accordingly, the results of operations are reflected in the   
Consolidated Statement of Earnings from the date of acquisition.  The purchase  
price has been preliminarily allocated to the assets acquired and the           
liabilities assumed based upon their estimated fair market value, and the excess
costs over net tangible assets are being amortized over 40 years.  See comments 
in the Management's Discussion and Analysis section of this filing regarding    
impacts of these transactions during the current quarter.                       

Note 5 - Long-term debt is comprised of the following:                          

                                                                [Download Table]


                         Sept. 12, 2000    March 28, 2000
                         --------------    --------------
                                                         
Commercial Paper             $ 295.4          $  259.1   
Notes Payable, 6.5%, due                                 
 2009                          147.0             146.9   
Notes Payable, 8 3/8%,                                   
 due 2003                      294.9                --   
Notes Payable, 8 1/2%,                                   
 due 2005                      243.5                --   
Revolving Credit Facility,                               
 due 2000                         --              25.0   
Revolving Credit Facility,                               
 due 2001                         --             568.0   
Other                           19.1               5.4   
                              ------          --------   
                               999.9           1,004.4   
Less current portion            17.2             442.1   
                              ------          --------   
                              $982.7          $  562.3   
                              ======          ========   


Borrowings under a $600 million revolving credit facility due 2001 established  
to initially finance the acquisition of Metz Baking Company (March 2000) were   
refinanced during the first quarter of fiscal 2001 through borrowings under the 
Company's commercial paper programs.  On July 25, 2000, Earthgrains issued $300 
million in three-year, 8-3/8% fixed-rate Notes due 2003 and $250 million in     
five-year, 8-1/2% fixed-rate Notes due 2005 from the $750 million shelf         
registration statement filed with the Securities and Exchange Commission, which 
became effective in April 2000.  Proceeds from these notes, which were issued at
a discount, were used to repay a portion of the outstanding commercial paper    
borrowings.  In conjunction with the fixed rate debt issuance, the $600 million 
credit facility was reduced to $50 million and the $400 million in forward      
starting interest rate swaps, entered into in May 2000, were terminated.  The   
$7.8 million loss on these swap agreements will be recognized as an adjustment  
to interest expense over the term of the underlying notes.                      

At September 12, 2000, borrowings outstanding under the commercial paper        
programs are supported by $550 million in lines of credit.  The commercial paper
borrowings were at weighted average interest rates of 6.9% and 6.6% during the  
current quarter and for the 24-                                                 

6 

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week period compared to weighted average short-term rates of 5.3% and 5.5%,     
respectively, for fiscal 2000.  Based on outstanding commercial paper and       
letters of credit, approximately $220 million was available for incremental     
borrowings under the existing $550 million in committed lines of credit at      
September 12, 2000.                                                             

The remaining $50 million in commitments under the $600 million revolving credit
facility was terminated by the Company in October 2000.                         

Note 6 - Earnings per share are based on the weighted average number of shares  
of Earthgrains common stock outstanding for the periods presented.  The         
difference in the weighted average shares outstanding used in the basic and     
dilutive earnings per share calculations represents the assumed conversion of   
stock options.                                                                  

Note 7 - Statement of Financial Accounting Standards No. 130, "Reporting        
Comprehensive Income" (SFAS 130) requires that noncash changes in shareholders' 
equity be combined with net income and reported as "comprehensive income."  The 
Company has elected to report comprehensive income in its Statement of          
Shareholders' Equity.  Other comprehensive income for the Company relates only  
to foreign currency translation adjustments.  For the 12- and 24-week periods   
ended September 12, 2000 and September 14, 1999, comprehensive income was $11.4 
million and $9.0 million, and $16.2 million and $23.0 million, respectively.    

Note 8 - On August 26, 2000, a strike was initiated by employees at the Fort    
Payne, Alabama bakery.  The strike spread to include 27 bakeries before ending  
with ratification of a new Fort Payne contract on September 22.  Significant    
incremental costs for overtime, temporary labor, security, travel, distribution 
and purchased goods were incurred for the Company to continue to operate        
bakeries and serve customers and consumers.  The labor strike had a significant 
impact on the quarter's results and is expected to have an even greater impact  
on third quarter earnings.  See further discussion of the strike-related impacts
in the discussion of results in the Management's Discussion and Analysis of     
Financial Condition section of this filing.                                     

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Note 9 - The business segments of the Company are Bakery Products, which        
consists of the U.S. Bakery Products division and the European Bakery Products  
division, and Refrigerated Dough Products, which contains the U.S. Refrigerated 
Dough Products division and the European Refrigerated Dough Products division.  
There have been no changes to the basis of segmentation or to the basis of      
measurement as presented in the 2000 Annual Report to Shareholders.  Summarized 
below is the Company's business segment information through the first quarter of
fiscal 2001 and 2000 (in millions):                                             

                                                                [Download Table]


                           12-week period ended 24-week period ended        
                           --------------------   --------------------      
                           Sept. 12,  Sept. 14,   Sept. 12,   Sept. 14,     
                             2000       1999        2000        1999        
                           ---------  ---------   ---------   ---------     
                                                                            
Income Statement Information:                                               
   Net Sales                                                                
      Bakery Products       $540.9     $408.2      $1,082.1    $804.1       
      Refrigerated Dough                                                    
       Products               62.3       61.2         120.7     114.9       
                            ------     ------      --------    ------       
      Total                 $603.2     $469.4      $1,202.8    $919.0       
                            ------     ------      --------    ------       

   Operating Income                                                         
      Bakery Products       $ 30.0     $ 25.8      $   62.8    $ 48.2       
      Refrigerated Dough                                                    
       Products                7.5        7.1          12.4      12.2       
      Corporate (a)           (2.6)      (2.6)         (5.3)     (5.3)      
                            ------     ------      --------    ------       
      Total                 $ 34.9     $ 30.3      $   69.9    $ 55.1       
                            ------     ------      --------    ------       

   Depreciation & Amortization                                              
      Bakery Products       $ 27.8     $ 19.8      $   55.5    $ 38.8       
      Refrigerated Dough                                                    
       Products                3.9        3.5           7.7       6.5       
      Corporate (a)            2.6        2.6           5.3       5.3       
                            ------     ------      --------    ------       
      Total                 $ 34.3     $ 25.9      $   68.5    $ 50.6       
                            ------     ------      --------    ------       

Balance Sheet Information:                                                  
   Capital Expenditures                                                     
      Bakery Products       $ 21.2     $ 15.1      $   39.0    $ 26.0       
      Refrigerated Dough                                                    
       Products                3.6        5.0           6.5       8.3       
                            ------     ------      --------    ------       
      Total                 $ 24.8     $ 20.1      $   45.5    $ 34.3       
                            ------     ------      --------    ------       

<FN>                                                                        
(a)  Amounts represent purchase accounting valuation in conjunction with the
acquisition of the Company by Anheuser-Busch in 1982 and the related        
depreciation and amortization thereon.                                      
</FN>                                                                       

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Management's Discussion and Analysis of Financial Condition and Results of      
Operations                                                                      

INTRODUCTION                                                                    
------------                                                                    

This discussion summarizes the significant factors affecting the consolidated   
operating results, financial condition and liquidity of The Earthgrains Company 
for the 12- and 24-week periods ended September 12, 2000 compared to the 12- and
24-week periods ended September 14, 1999.  This discussion should be read in    
conjunction with the consolidated financial statements and notes thereto for the
fiscal year ended March 28, 2000 included in the Company's Annual Report to     
Shareholders.                                                                   

RESULTS OF OPERATIONS                                                           
---------------------                                                           

Net sales for the 12-week period ended September 12, 2000, increased 28.5% to   
$603.2 million from $469.4 million reported for the comparable prior-year       
period, despite the significant impact of a strike during the quarter and an    
unfavorable impact from foreign exchange rates.  The strike, which began by     
employees at the Fort Payne, Alabama bakery on August 26, spread to include 27  
bakeries before ending with ratification of a new Fort Payne contract on        
September 22.  The estimated strike impact on sales during the current quarter  
was between $8 million and $10 million.  For the respective 24-week periods, net
sales increased to $1,202.8 million from the year-ago $919.0 million.           
International sales during the current quarter were affected by a $10.0 million 
unfavorable foreign exchange rate compared to the same quarter in the prior     
year, and by $21.6 million year to date.  Excluding the unfavorable effect of   
foreign exchange rates, sales increased 30.6% for the current quarter and 33.2% 
year to date.  Sales growth can primarily be attributed to the contribution from
the Metz Baking acquisition.                                                    

Gross margins increased in the current period to 46.0% from 44.5% a year ago and
to 46.3% from 44.7% year to date.  The margin improvements can be attributed to 
benefits from acquisitions, enhanced price and mix of products, lower ingredient
costs, and the greater percentage of business in bakery operations which has a  
higher gross margin than the refrigerated dough business.  These improvements   
were partially offset by significant incremental expenses, reduced manufacturing
efficiencies and lost revenues, all resulting from the strike.  Incremental     
costs for overtime, temporary labor, security, travel and purchased goods were  
incurred for the Company to continue to operate bakeries in order to serve      
markets and protect customer relationships.  The continued impact of the strike 
is expected to be even greater to third quarter profitability.                  

On a percentage-of-sales basis, marketing, distribution and administrative      
expenses increased to 40.2% from 38.0% in the year-ago quarter and to 40.5% from
38.7% on a year-to-date comparison.  The increase can primarily be attributed to
incremental strike-related distribution costs and the furthering of mix shift   
between the Company's segments to a greater percentage of business in the bakery
operations, which reflects higher selling and delivery costs, coupled with      
increases in fuel costs, and additional goodwill amortization relative to       
acquisitions.                                                                   

The increase in interest expense is directly related to the increased long-term 
debt level resulting from acquisitions, generally higher interest rate levels,  
and the conversion from lower cost floating rate to fixed-rate, long-term debt  
during the quarter.  Approximately $1.1 million during the quarter and $1.6     
million year to date was due to higher interest rates.                          

The higher effective income tax rate in the current quarter is a direct result  
of the impact of the increased nondeductible goodwill amortization, related     
primarily to the Metz acquisition, on a strike-reduced earnings                 

9 

10-Q 11th Page of 15 TOC 1st Previous Next ↓Bottom Just 11th
level.  Nondeductible goodwill amortization increased from $2.1 million to $5.0 
million in the current quarter, and from $4.2 million to $10.0 million year to  
date.  Due to continued significant impacts of the strike to be reflected in the
upcoming third quarter, the effective tax rate is expected to remain higher than
normal for this fiscal year, in the range of 47-48%.                            

Net earnings for the 12-week period were $8.9 million or $0.21 per diluted      
share, compared to $15.7 million, or $0.37 per diluted share in the prior year's
comparable period.  The negative impact of the strike during the current quarter
was estimated at $0.13 per diluted share.  Year-to-date earnings were $19.8     
million or $0.48 per diluted share compared to $28.2 million or $0.67 per       
diluted share in fiscal 2000.  The year-over-year comparison was affected by the
strike and, as expected, acquisition-related impacts discussed above.           

Operating Segment Information                                                   
-----------------------------                                                   

The business segments of the Company are Bakery Products, which consists of the 
U.S. Bakery Products division and the European Bakery Products division, and    
Refrigerated Dough Products, which contains the U.S. Refrigerated Dough Products
division and the European Refrigerated Dough Products division.  This discussion
reflects significant impacts in business results by operating segment, as       
reported consistently with how management assesses operating segment            
performance.  See Note 9 for comparative presentation of business segment data. 

Bakery Products                                                                 
---------------                                                                 

The Bakery Products segment reflected significantly higher net sales during the 
current 12- and 24-week periods over the comparable year-ago periods, despite   
significant unfavorable impacts of foreign exchange and the current quarter     
strike.  Net sales for the segment increased 32.5% to $540.9 million during the 
current quarter and 34.6% to $1,082.1 million year to date.  Excluding the      
exchange rate impact, sales increased 34.4% in the current quarter and 36.7%    
year to date.  The Metz acquisition contributed approximately $140 million in   
net sales during the current quarter and $276 million to date for fiscal 2001.  
Continued favorable pricing and product mix shift to premium and superpremium   
product lines, and core volume growth, particularly in the European Bakery      
operations, also contributed to the sales increase.                             

Operating results improved during the quarter for the Bakery Products segment,  
despite unfavorable impacts from the strike and foreign exchange rates.         
Operating income increased 16.3% for the current quarter over the prior year to 
$30.0 million and 30.3% to $62.8 million year to date.  Excluding the foreign   
exchange impact, operating income increased by 19.0% to $30.7 million for the   
quarter and 32.8% to $64.0 million year to date.  Increased revenues, enhanced  
price and mix of products, and lower ingredient costs were primary drivers of   
the improvement offsetting higher fuel costs, impacts of the strike, and higher 
goodwill amortization.  Integration of the Reposteria Martinez acquisition in   
Spain (March 1999), which is substantially completed, continued to contribute to
very strong results for the European Bakery operations of the segment.          

Refrigerated Dough                                                              
------------------                                                              

Net sales for the Refrigerated Dough segment increased slightly during the      
current quarter to $62.3 million, compared to the year-ago quarter and to $120.7
million for the 24-week period.  Excluding the impact of foreign exchange, net  
sales increased 5.2% to $64.4 million during the quarter and 9.1% to $125.4     
million year to date.  Operating income for the quarter was $7.5 million        
compared with $7.1 million in the prior year and $12.4 million year to date,    
consistent with $12.2 million in the year-ago period.  The Patrick Raulet       
acquisition contributed positively to sales and operating results but was offset
by the category pricing and volume impacts domestically.  A domestic price      
increase initiated in August along with focus on higher                         

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margin products and new product introductions within that category are expected 
to drive improvements in the upcoming third quarter, a higher seasonal period   
for this segment.                                                               

LIQUIDITY AND CAPITAL RESOURCES                                                 
-------------------------------                                                 

Cash flow from operations continues to be a primary source of liquidity.  Net   
working capital, excluding cash and cash equivalents, was $116.3 million at     
September 12, 2000 compared to a negative $366.6 million at March 28, 2000.  The
negative working capital at fiscal year end 2000 is directly attributed to the  
current maturities of the revolving credit facility used to initially finance   
the Metz acquisition.  During the current quarter the initial bridge financing  
for the acquisition was substantially refinanced with the fixed-rate long-term  
debt issuance.  Additionally, the increase in working capital from fiscal year  
end 2000 reflects the seasonality of the business.                              

$45.5 million has been invested in capital expenditures to date, with spending  
for the total fiscal year planned for a level of $110-115 million.              
Additionally, 101,100 shares were repurchased during the current quarter at a   
cost of $2.0 million; 186,100 shares have been repurchased year to date at a    
cost of $3.3 million.  Approximately 1.9 million shares are authorized for      
repurchase as of September 12, 2000 under the Company's repurchase program.     

The Company initially financed the Metz acquisition (March 2000) with a new $600
million revolving credit facility due 2001.  During the first quarter of fiscal 
2001, borrowings under this revolving credit facility were refinanced through   
borrowings under the Company's commercial paper programs.  The commercial paper 
borrowings were at a weighted average interest rate of 6.9% during the current  
quarter compared to a short-term weighted average rate of 5.3% for fiscal 2000. 
For the current year 24-week period, the weighted average short-term rate was   
6.6% compared to 5.5% for the respective year-ago period.  These commercial     
paper programs are supported by the existing lines of credit.                   

On July 25, 2000, Earthgrains issued $300 million in three-year, 8-3/8% fixed-  
rate Notes due 2003 and $250 million in five-year, 8-1/2% fixed-rate Notes due  
2005 under the Company's $750 million shelf registration statement filed with   
the Securities and Exchange Commission in April 2000.  Proceeds from the        
offering were used to refinance outstanding commercial paper borrowings.  In    
conjunction with the fixed-rate debt issuance, $550 million of the $1.1 billion 
total committed lines of credit were terminated by the Company.  The $400       
million in interest rate swaps, entered into in May 2000, were also terminated. 
The $7.8 million loss on these swap agreements will be recognized as an         
adjustment to interest expense over the term of the underlying notes.  As of    
September 12, 2000, approximately $220 million was available under these lines  
for future borrowings.                                                          

The remaining $50 million in commitments under the $600 million credit facility 
was terminated by the Company in October 2000.                                  

The Company's available cash will be used to fund capital expenditures, interest
payments pursuant to the outstanding debt and the initiative to begin repaying a
portion of the debt in fiscal 2001, and dividends to shareholders.  Cash        
provided by operations and borrowings available under the existing credit       
facilities and commercial paper programs and the remaining shelf registration   
should continue to provide the necessary funding for ongoing cash requirements. 

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ENVIRONMENTAL MATTERS                                                           
---------------------                                                           

The Company is subject to Federal, state and local environmental protection laws
and regulations and is operating within such laws or is taking action aimed at  
assuring compliance with such laws and regulations.  Earthgrains has been       
identified as a potentially responsible party ("PRP") at certain locations by   
the EPA and may be required to share in the cost of cleanup with respect to one 
material site.  While it is difficult to quantify with certainty the financial  
impact of actions related to environmental matters, based on the information    
currently available it is management's opinion that the ultimate liability      
arising from such matters, taking into consideration established reserves,      
should not have a material effect on the Company's results of operations or     
financial position.                                                             

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PART II.  OTHER INFORMATION 
--------------------------- 

Item 1.   Legal Proceedings.  The Company has no legal proceedings which have   
become a reportable event in the current period.                                

Item 2.   Changes in Securities.  None.                                         

Item 3.   Defaults Upon Senior Securities.  None.                               

Item 4.   Submission of Matters to a Vote of Security-Holders.  No matters were 
submitted to a vote of security holders.                                        

Item 5.   Other Information.  None.                                             

Item 6.   Exhibits and Reports on Form 8-K.                                     

(a)  Exhibit 27 - Financial Data Schedule.                  

(b)  Reports on Form 8-K - None.                            

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SIGNATURES

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

                 THE EARTHGRAINS COMPANY
      (Registrant)

Date:  October 25, 2000              By:  Mark H. Krieger                       

             /S/ MARK H. KRIEGER
                 Mark H. Krieger
                  Vice President and Chief
           Financial Officer

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

Filed on:	10/26/00
	10/25/00	15
	10/10/00	1
For Period End:	9/12/00	1	12
	8/26/00	8
	7/25/00	7	12	8-K
	3/28/00	6	12	10-K
	3/18/00	6		8-K
	9/14/99	8	10	10-Q
	6/30/99	7		11-K
				List all Filings

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Earthgrains Co/DE – ‘10-Q’ for 9/12/00

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