Earnings Reports for Jan. 31

AOL Time Warner Reports 14 Percent Rise in Adjusted Earnings for Q4

AOL Time Warner, in the first combined earnings report since completing its merger, said today that its pretax earnings rose 14 percent in the fourth quarter from a year ago.

The company cited strong performances at its America Online service, cable television systems and publishing operations. Earnings from music, filmed entertainment and its TV networks were lower in the quarter.

Separately, the company said it plans to rename its CNNfn cable network as CNN Money later this year, and will offer more personal finance and small business coverage after the financial markets close.

AOL Time Warner said earnings before interest, taxes, depreciation and amortization rose to $2.4 billion compared with $2.1 billion a year ago. Revenues rose 8 percent to $10.2 billion from $9.46 billion a year earlier. The company reported year-ago figures as if AOL and Time Warner had already been merged at that time.

On a per-share basis, the results amounted to a profit of 14 cents a share, down from 48 cents a share last year. The results were in line with the expectations of analysts surveyed by First Call/Thomson Financial.

Including interest, taxes, preferred dividends and one-time items, AOL Time Warner said it lost $1.09 billion in the latest quarter in contrast to a loss of $201 million a year ago.

For the quarter, America Online added 2.1 million subscribers to bring its total to 26.7 million members by year-end. Its cable systems division reported 16 percent growth in its profit from operations on a 13 percent increase in revenue.

Publishing earnings rose 9 percent on a 7 percent revenue increase. The company's Time Inc. subsidiary is a major magazine publisher with titles such as Time, Sports Illustrated and People.

In its filmed entertainment division, AOL Time Warner said earnings fell 16 percent for the quarter as revenue increased slightly. Strong gains in sales of DVD-format videos were offset by weak performing new films from New Line Cinema like "Little Nicky" and lower revenue from sales of TV shows for rerun on television. Retail store sales also were weak. The company plans to divest its retail operations.

Music business earnings fell 10 percent to $178 million on flat revenue. The lower results in both music and movies were in line with a warning the company issued in December.

Earnings from its television networks including CNN, Turner Network Television, TBS Superstation and Cartoon Network slipped less than 1 percent in the quarter as revenue rose 4 percent.

For the year, AOL Time Warner said its earnings before interest, taxes and charges rose to $8.4 billion, or 94 cents a share, from $7.0 billion, or 71 cents a share, in 1999. On a net basis, the company's loss widened to $4.4 billion in 2000 from $2.5 billion in 1999. Full-year revenues rose 11 percent to $36.2 billion from $32.5 billion.


Clorox Second-quarter Profits Down on Sales Decline

Household products maker Clorox said today net income fell 7.5 percent, before special charges, in line with its recent warning, as sales declined across many of the company's product lines.

The Oakland, Calif.-based maker of Clorox bleach, Glad plastic bags and Kingsford charcoal, said net income was $74 million, or 31 cents a share, before the charges, compared with $80 million, or 33 cents a share, a year ago.

Analysts on average forecast earnings of 30 cents a share, according to market research firm First Call/Thomson Financial, though the average estimate was 38 cents a share before the company issued a profit warning in December.

At that time, the company also said it would take $150 million to $200 million in one-time charges in calendar year 2001 as a result of actions to enhance margins and asset utilization. Clorox said it would streamline manufacturing in order to cope with strains from its $2 billion acquisition of First Brands and slowing markets.

In the second quarter, unit volume dropped 2 percent, while sales fell 6 percent to $899 million. The drop in sales came as customers shifted away from higher priced products, while the company also took higher reserves to cover products it could not sell. In December, the company said it would write down inventory for a home dry-cleaning product and a premium Black Flag insect spray that had not sold as well as planned.

Foreign currency weakness also cut into sales. About 17 percent of the company's sales came from outside the United States.

Weakness in Brita water filtration, Glad plastic bags, Kingsford charcoal and cat litter all dragged down sales. BACK TO TOP

Philip Morris Misses Expectations

Tobacco and food giant Philip Morris said today its fourth quarter profits missed Wall Street expectations by a penny.

New York-based Philip Morris, the world's largest tobacco company with the top-selling Marlboro cigarette brand, said it earned 87 cents per share, up from 77 cents a year earlier.

Analysts on average expected the company, which also operates Kraft Foods Inc. and the Miller Brewing Co., to earn 88 cents per share, according to First Call/Thomson Financial, which tracks such data.

Philip Morris acquired Nabisco Holdings last month, adding well-known brands such as Oreo cookies and Ritz crackers to Kraft, the world's No. 2 food company behind Swiss giant Nestle. BACK TO TOP Analysts have forecast core earnings per share for P&G of $3.10 to $3.17 for the full fiscal year, up from $2.95 in the previous year. The company reiterated that it was comfortable with the high end of this range of estimates.

Based on current trends and expectations, the company said it now expects unit volume to be about flat for the year, and sales, excluding foreign exchange effects, to be up 2 percent to 4 percent.

In the past year the stock, a component of the Dow Jones industrial average, has underperformed that index by about 30 percent.

In recent months P&G has raised prices on its products to try to cope with rising costs. Most of those price boosts have been matched by competitors, but in some instances the increases were not matched, causing P&G to lose market share. BACK TO TOP

UPS Cuts 2001 Outlook, Misses Expectations

United Parcel Service, the world's No. 1 package delivery company, reported today a profit slightly above lowered Wall Street expectations and cut its earnings forecast for 2001 because of a slowing economy.

Atlanta-based UPS, which reported last month the slowing U.S. economy was cutting into its domestic package delivery volumes, said it expected earnings per share to grow 9 percent to 11 percent this year, down from a previous estimate in the "mid-teens."

The company also said revenue growth would likely fall within a range of 8 percent to 10 percent this year. Last month, it said it expected to post revenue growth of 10 percent barring further slowing in the economy.

"Our rate of growth this year will not be at the same pace as we've seen in the last few years domestically," UPS Chief Financial Officer Scott Davis said in a statement accompanying fourth-quarter financial results. "But we do expect to grow, and at a rate faster than the domestic package market."

For the three months ended Dec. 31, UPS earned $724 million, or 63 cents a share, compared to $661 million, or 56 cents a share, in the year-earlier period.

Analysts on average expected UPS to earn 61 cents, according to research firm First Call/Thomson Financial, which tracks consensus data.

That estimate was lowered from 64 cents last month after UPS announced that a slowdown in the U.S. economy appeared to be cutting into its holiday package volumes.

UPS' global volume — a key measure of financial health in the package delivery industry — averaged 14.7 million pieces a day in the quarter, up 3.6 percent from the same period last year.

UPS averaged volume of about 1.3 million pieces a day for its entire international service, a 13.3 percent gain from last year. Volumes for the company's U.S. domestic package business averaged about 13.5 million pieces a day, a 2.8 percent rise over the year-earlier period.

UPS, which was recently awarded a new China route, said it "remained bullish" on its international markets. BACK TO TOP

Schering-Plough Reports Healthy Earnings

Drug maker Schering-Plough said today that fourth-quarter profits rose 13 percent, in line with estimates, on strong sales of its allergy drug Claritin and its Rebetron therapy for Hepatitis C.

The Kenilworth, N.J.-headquartered firm said it earned $571 million, or 39 cents per share in the quarter, compared with $506 million, or 34 cents per share, in the year-ago period.

Schering-Plough was expected to earn 39 cents a share during the quarter, said First Call/Thomson Financial, which compiles securities analysts' profit expectations.

Fourth-quarter sales rose 6 percent to $2.4 billion from $2.3 billion a year ago.

U.S. pharmaceutical sales rose 11 percent to $1.3 billion.

The company said Claritin sales rose 15 percent in the quarter to $662 million, while Rebetron sales grew 9 percent to $324 million.

Global fourth-quarter sales of the company's nasal-inhaled asthma drugs, led by Nasonex, jumped 12 percent to $151 million. Its anti-clotting drug Integrilin saw sales of $50 million, up from $20 million in the 1999 quarter.

Sales of Remicade for rheumatoid arthritis and Crohn's Disease were $21 million in the quarter, compared with $6 million in the year-ago period.

Claritin is scheduled to lose its U.S. marketing exclusivity next year — an event which would usher in competition from cheaper generics. It is awaiting U.S. marketing approval for a closely related compound, desloratadine, that the company claims is superior to Claritin.

Schering-Plough received approval on Monday, Jan. 22, for a longer-acting version of its Intron-A treatment for hepatitis C.

From the start of the year to Jan. 24, Schering-Plough shares have underperformed the S&P 500 by roughly 12 percent. The company, however, has outperformed the American Stock Exchange Pharmaceutical Index by 3.5 percent.


Starbucks Beats Wall Street Forecasts

Starbucks Corp. reported its profits rose 41 percent in its fiscal first quarter, beating Wall Street forecasts, as the company continued its rapid global expansion, and raised its profit goal for 2001.

The Seattle-based coffee-shop giant said net earnings for the quarter ending Dec. 31 totaled $49 million, or 25 cents per diluted share, up from $34.7 million, or 18 cents, a year earlier.

Analysts on average had expected Starbucks to earn 23 cents per share, according to First Call/Thomson Financial. As previously reported, Starbucks's consolidated net revenues rose 26 percent to a record $667 million in the first quarter, from $529 million in the same period a year earlier.

Starbucks operates more than 3,800 coffee shops, including 3,200 in North America.



Pfizer's Profits Rise on Strong Viagra Sales

Pfizer, the No. 1 U.S. drugmaker, reported today a 20 percent gain in fourth-quarter operating earnings, meeting Wall Street expectations, helped by sales of its blockbuster anti-cholesterol drug, Lipitor, and arthritis treatment Celebrex.

The New York-based company, also known for its anti-impotence pill Viagra, reported earnings of $1.76 billion, or 27 cents per diluted share, excluding the impact of special items and merger-related costs. In the same year-ago period, the company earned $1.47 billion, or 23 cents per share.

Analysts, on average, had estimated the drugmaker, which acquired New Jersey drug maker Warner-Lambert Co. last year along with Warner-Lambert's crown jewel, Lipitor, would earn 27 cents a share.

After special items and merger related costs, quarterly net income fell 3 percent to $1.42 billion compared with $1.27 billion in the year ago period. Earnings per share after items remained flat at 23 cents.

"With remarkable speed and focus, we have rapidly integrated the industry's two fastest-growing companies while more than doubling our initially forecasted year-2000 merger savings to about $430 million," said Chairman William Steere Jr.

Looking at 2001, Pfizer forecast earnings per share of $1.27 or better, excluding items, and said it plans to spend $5 billion on research and development. Pfizer said it sees 25 percent earnings growth through 2002, and double-digit recorded revenue growth in 2001.

The company said fourth-quarter revenues with special items rose 8 percent to $8.1 billion compared with $7.5 billion a year ago. Reported global sales of prescription drugs in the United States rose 19 percent to $4.2 billion, excluding the impact of foreign exchange and the company's withdrawal last year of diabetes drug Rezulin following safety concerns.

Outside the U.S., pharmaceutical sales jumped 20 percent to $2.3 billion in the quarter on the same basis.

Shares of Pfizer have flourished in 2000 along with those of the rest of the pharmaceutical industry, as investors took money out of slumping technology stocks in favor of defensive areas like the drugs sector — an area seen as safe haven because the economy does not affect how many pills people take.

The stock has outperformed its peers on the American Stock Exchange Pharmaceutical Index by nearly 5 percent over the last 52 weeks, and out-paced the benchmark Standard & Poor's 500 index by about 20 percent over that period.

Pfizer said its so-called "alliance" revenues from combined sales of two drugs it co-markets with other companies — Pharmacia Corp.'s Celebrex and Eisai Inc.'s Alzheimer's disease treatment Aricept — soared 63 percent to $348 million in the quarter.

Global sales of Lipitor jumped 26 percent to $1.43 billion and grew 33 percent in the year to $5 billion — reaching the company's previously stated goal.

Global Viagra sales in the period rose 37 percent to $380 million in the fourth quarter.

Regarding its acquisition of Warner-Lambert, Pfizer said it achieved $430 million in savings in 2000 and sees merger savings in 2001 of $1.2 billion, growing to at least $1.6 billion in 2002. BACK TO TOP

International Paper's Earnings Fall 36 Percent

International Paper, the world's largest paper and forest products company, said today its fourth-quarter earnings fell 36 percent due to rising energy costs and the slowing U.S. economy.

The company said net earnings for the quarter, before special items, were $145 million, or 28 cents per share, compared with $227 million, or 55 cents per share in the 1999 quarter.

After special items, including pre-tax, one-time charges for Union Camp and Champion merger-related costs, IP posted a loss of 85 cents for the fourth quarter.

After IP warned a month ago of an earnings shortfall, the average consensus of analysts polled by First Call/Thomson Financial was lowered from 44 cents to 30 cents per share.

Fourth-quarter net sales were $7.2 billion, compared with $6.3 billion for the same period in 1999.

John Dillon, chairman and chief executive officer, said the slowing economy and rising energy costs occurred when the weather turns colder and demand drops for lumber and other wood products.

"As demand fell, we maintained our commitment to keep our production in line with customer orders, which negatively impacted overall sales," he said. "While many of these factors are continuing into the opening months of 2001, the steps we are taking will lead to a stronger International Paper for the long term."

International Paper said it has nearly completed its previously announced plan to adjust capacity as the wood products industry continues to battle lower demand and higher energy costs.

The company has closed its Mobile, Ala. and Camden, Ark. mills, and completed the downsizing of the Courtland, Ala. mill. The closure of the Lockhaven, Pa. mill is proceeding on schedule, IP said.

It also said asset sales are progressing rapidly as International Paper focuses on its three core businesses — paper, packaging and forest products. The company has increased its asset sales target to $5 billion, including timberlands, to be completed by the end of 2001.

It said it aims to reduce capital spending to $1.2 billion in the year 2001, which is about 60 percent of depreciation and amortization. The capital expenditure program in 2001 is 20 percent below the $1.4 billion spent in the year 2000, it said.

International Paper makes paper, packaging and wood and building products, as well as being the largest private forest landowner in the world. It has operations in nearly 50 countries, employs more than 117,000 people and exports its products to more than 130 nations. BACK TO TOP

Mad Cow Takes a Bite out of McDonald's

Fast food giant McDonald's said today its fourth-quarter earnings fell 7 percent as an outbreak of mad cow disease in Europe pushed the region's sales down 10 percent and threatened to weaken the company's first quarter results.

Net income at the Oak Brook, Ill.-based hamburger maker, the largest restaurant company in the world, fell to $452 million, or 34 cents a share, from $486.2 million, or 35 cents a share, a year earlier. McDonald's was expected to earn 35 cents a share, according to a recent poll of analysts by First Call/Thomson Financial.

McDonald's, which operates nearly 5,500 restaurants in Europe, its second-largest market behind the United States, has since November seen sales erode amid an outbreak of mad cow disease, or bovine spongiform encephalopathy, on the continent.

BSE is a chronic degenerative disease affecting the central nervous system of cattle and is believed to be contracted through feed containing animal by-products. It has been linked to a similar brain-wasting disease in humans.

CEO Jack Greenberg said in a statement that he expects a difficult first quarter of 2001 due to continued mad cow concerns, tough comparisons from last year, and an extra trading day in 2000.

"We expect the first quarter to be very challenging, due to outstanding results and an extra trading day in 2000, and continuing consumer confidence issues about European beef," he said.

The company has been battling public fears with stepped up advertising and greater promotion of non-beef products.

Sales to Europe, the company's second-largest market behind the U.S., fell 10 percent in the quarter to $2.21 billion from $2.45 billion one year ago. Operating income fell 17 percent to $267.3 million from $322.2 million.

"Europe got hit pretty hard," said Bear Stearns analyst Joe Buckley, who in June lowered his rating on McDonald's shares to neutral due to broader international concerns, including fluctuations in the euro. "The problem with mad cow is that it is an unknown. No one knows how long these concerns last."

Systemwide sales, which include sales from restaurants owned by franchises and those owned by the company, rose to $9.92 billion from $9.75 billion a year ago.

Sales in the United States, McDonald's largest market, rose 3 percent to $4.82 billion, from $4.68 billion one year ago. Operating income rose 14 percent to $385.3 million from $338.9 million. Sales in Asia Pacific, McDonald's third-largest market, rose 3 percent to $1.75 billion from $1.70 billion a year ago.

"Despite a number of operating challenges, our worldwide comparable sales were positive and systemwide sales increased seven percent in constant currencies for the year," Greenberg said.

The company plans to add about 1,700 restaurants in 2001, he said. The company said that 2001 per share earnings were expected to grow between 10 percent to 13 percent, excluding the impact of foreign currency translation.

In the year, it plans to buy back about $1.2 billion in stock, the remainder of a three-year $4.5 billion plan. In 2000, it purchased $2.0 billion worth. BACK TO TOP

Qwest Tops Wall Street

Telephone and data services provider Qwest Communications today posted a better-than-expected 44 percent jump in fourth-quarter profits, propelled by robust growth in Internet, data and wireless telephone revenues.

Qwest, which acquired regional phone company U S West Inc. last year in a $36 billion deal, said in a statement it was on track to meet its targets for 2001 revenues and earnings before interest, taxes, depreciation and amortization, or EBITDA, a key measure of a company's performance.

Andrew Hamerling, an analyst with Banc of America, called the results "terrific."

"Everything is as expected," he said. "Overall I'd say it's a great quarter."

The Denver-based company said pro forma profits excluding one-time items rose to $270 million, or 16 cents a diluted share, compared with $188 million, or 11 cents a share, a year ago.

The results beat Wall Street expectations of 14 cents a share, according to research firm First Call/Thomson Financial.

"With the initial integration of the [U S West] merger successfully completed, we are on track to meet our expected growth rates," Chairman and Chief Executive Joseph Nacchio said in a statement.

Qwest said revenues rose 9.9 percent to $5.02 billion. The increase was driven by growth of almost 40 percent in Internet and data services.

Wireless revenues rose 90 percent to almost $150 million. The number of wireless customers increased to more than 805,000, above the company's target of 800,000 for the end of 2000.

Fourth-quarter EBITDA was up 19.7 percent, to $1.99 billion.

Shares of Qwest have fallen about 10 percent amid sharp declines throughout the telecom sector over the past year. Its stock has underperformed the Standard & Poor's 500 index by about 4 percent.

The company also said it expected to double the number of customers for its digital subscriber line (DSL) service, which provides high-speed Internet access over conventional phone lines, to 500,000 by the end of the year.

Qwest said it ended 2000 with more than 255,000 DSL customers, above its target of 250,000.

It also said it expected to file with the Federal Communications Commission to enter long-distance service in several states by the end of 2001.

It expects to apply to reenter long-distance business in one of the states in its local service area by the summer.

Tavis McCourt, an analyst with Morgan Keegan & Co. Inc. in Memphis, Tenn., said entry into long-distance markets was vital for Qwest's growth.

"Certainly they are going to be as aggressive as possible to make that a reality," he said.

Qwest reiterated that it expected 2001 revenues to be in the range of $21.3 billion to $21.7 billion and EBITDA to be $8.5 billion to $8.7 billion.

Hamerling, the Banc of America analyst, said the biggest challenge facing Qwest was to meet its target of 20 percent long-term EBITDA growth.


Whirlpool Reiterates Job Cuts

Appliance maker Whirlpool met Wall Street's lowered fourth-quarter earnings expectations and affirmed its global restructuring plan will mean up to 6,000 jobs cut in the coming year.

The company said today it expects to trim more than 2,000 jobs worldwide as part of the restructuring's first phase, with more details to be announced within two weeks.

All told, the company shake-up — which will pare 10 percent of Whirlpool's 60,000-member work force — will result in pre-tax charges of $300 million to $350 million, with annualized savings of $225 million to $250 million, the company said.

"This will be a year of challenge and opportunity," David R. Whitwam, Whirlpool's chairman and chief executive, said in a statement. "We believe that our strong brands, global platform, innovative products and consumer focus — combined with our restructuring efforts and the associated lower cost structure — will produce a strong operational performance and solid financial results in 2001."

Whirlpool said its fourth-quarter net earnings were $67 million, or $1 per share, compared with $113 million, or $1.51 per share, during the year-ago period.

Analysts surveyed by First Call/Thomson Financial were expecting 99 cents per share, having lowered their estimate from $1.42 a share after Whirlpool issued an earnings warning last month. At the time, Whirlpool blamed intensified price competition, rising material costs, and slowing or declining demand.

The company said sales during the three months ended Dec. 31 were $2.58 billion, down 4 percent from $2.69 billion in the year-ago period.

It added that it expects its first-quarter performance, excluding charges, to be in line with fourth-quarter earnings of $1 per share. Analysts surveyed by First Call/Thomson Financial had been expecting $1.02 per share.

The North American appliance industry has been expected to be down 7 percent to 8 percent in the fourth quarter versus the same period in 1999, Whirlpool said last month. Earlier company estimates forecast a fourth-quarter decline in industry shipments of 2 percent to 3 percent.

Whirlpool has said its restructuring involves a reduction and reconfiguration of global operations, including the closure of some plants.

For the year, Whirlpool earned $367 million, or $5.20 per share, on sales of $10.33 billion. In the previous year, the company earned $347 million, or $4.56 per share, on sales of $10.51 billion.

Whirlpool is the world's largest manufacturer and marketer of major home appliances. It sells products under 11 brand names in more than 170 countries. The Benton Harbor-based company has major operations in seven states — Arkansas, Indiana, Michigan, Mississippi, Ohio, Oklahoma and Tennessee — and 12 countries, including Canada and Mexico.