Earnings Reports for Jan. 25

JDS Uniphase Corp. Revenues Surge

JDS Uniphase Corp. the world's No. 1 supplier of fiberoptic components, said its second-quarter results edged above analyst expectations by 2 cents driven by ongoing strong demand.

JDS Uniphase reported pro forma net earnings excluding goodwill of $208 million, or 21 cents per share, compared with year-earlier earnings of $177 million, or 18 cents a share. The pro forma results include revenues from the E-Tek Dynamics Inc. acquisition in June 2000.

Revenues for the quarter surged 161 percent to $925 million over $354 million in the same period last year.

On average, 30 analysts polled by research firm First Call/Thomson Financial expected earnings of 19 cents per share, while the consensus revenue estimate from 12 analysts was $924 million.

The company also said it expects third-quarter pro forma earnings equal to or slightly better than the second quarter, with revenues between 7 percent and 10 percent above the second quarter.


Lockheed Martin Beats Expectations

Lockheed Martin, the world's largest defense contractor, reported today sharply lower fourth-quarter profits but beat Wall Street forecasts as sales from its systems integration, space systems and aeronautics businesses increased.

Maryland-based Lockheed, maker of the F-16 fighter jet, also raised its growth estimate for 2001 earnings, targeting 25 percent to 30 percent improvement from 2000 levels, before unusual items. That is up from earlier guidance of 20 percent growth.

For the fourth quarter, Lockheed posted net earnings of $89 million, or 21 cents per share, down 70 percent from the $293 million, or 76 cents per share, a year earlier.

Excluding unusual and one-time items, operating income was 38 cents a share, vs. 59 cents in the same period of 1999. Analysts had expected operating earnings of 36 cents per share, according to First Call/Thomson Financial, which tracks estimates.

Net sales rose to $7.6 billion from $7.0 billion a year earlier. Sales would have increased by 10 percent but for the effects of acquisitions and divestitures, the company said.

Lockheed's fourth-quarter bottom line included the impact of the aerospace electronics systems divestiture, a debt tender offer and a charge associated with an investment.

"We are delighted with the accomplishments that Lockheed Martin achieved in 2000," Vance Coffman, chairman and chief executive, said in a prepared statement. "We exceeded all financial goals set for 2000, including achieving record orders and backlog, record free cash flow generation, substantial debt reduction, and the receipt of fair value for our divestitures."

For the full year, Lockheed posted a net loss of $1.29 per share vs. a profit of 99 cents in 1999. Excluding unusual items, the company earned $1.07 per share for 2000, compared with $1.50 in 1999.

The company generated free cash flow of $265 million in the fourth quarter and a record $1.8 billion for the full year. Lockheed said it expects to generate at least $800 million of free cash flow in 2001, and $1.8 billion for 2001 and 2002 combined.

Net debt fell by about $3.0 billion in 2000 and backlog at year-end totaled $56.4 billion, up from $45.9 billion a year earlier. Lockheed closed the year with $9.96 billion in total long-term debt, down from $11.48 billion a year earlier.

Sales from Lockheed's systems integration, space systems, aeronautics and global telecommunications segments rose in the fourth quarter, while technology services showed a decline.

The systems integration business posted a 10 percent increase in sales, with results from the naval electronic and surveillance systems product line driven by higher volume on land surveillance systems contracts and increased activity on the new attack submarine program.

Increases in the segment's missiles and air defense product line were due to higher volume on some tactical missile programs, which helped offset declines in volume on some fire-control and sensor contracts.

The space systems segment saw a 12 percent gain in sales for the quarter, primarily due to commercial space activities, which outweighed declines in military, civil and classified satellite activities. Still, the group's sales results for the full year fell 1 percent.

The United Arab Emirates (UAE) F-16 contract helped bolster sales for Lockheed's aeronautics segment in the fourth quarter, offsetting anticipated reductions in scheduled deliveries on other F-16 fighter aircraft programs. The segment's sales decline for the year was attributed to those anticipated delivery declines, the company said.

Lockheed said it expects earnings to grow 25 percent to 30 percent for 2001, up from previous guidance of 20 percent.

The increase reflects lower interest expense, a lower effective tax rate of 40 percent, and an assumed smaller decline in retirement plan income than projected previously, the company said.

Lockheed's stock has outperformed the broader market by more than 50 percent over the last year, as have the stocks of many of its defense industry peers. Relative to rivals, Lockheed shares have more closely tracked the Standard & Poor's aerospace and defense index, outperforming by about 10 percent. BACK TO TOP

Profits Still Smoking at R.J. Reynolds

Cashing in on another round of cigarette price increases and expanded shipments, R.J. Reynolds reported improved fourth-quarter results.

The nation's second largest cigarette maker earned $100 million, or 99 cents per share, for the quarter, beating Wall Street expectations. In the same time period a year ago, the company posted 79 cents per share.

In a survey by First Call, analysts estimated that RJR's fourth-quarter earnings per share would be 96 cents.

Fourth quarter sales rose 3.3 percent to $2.04 billion from $1.98 billion and annual sales were up 8 percent to $8.17 billion. For the year, per share profit was up 17 percent to $3.97 and net income was up 9 percent at $404 million.

R.J. Reynolds Tobacco Holdings chairman Andrew J. Schindler said the company's quarterly earnings were helped by sales growth in the company's cigarette brands.

Last month, both RJR and market leader Philip Morris Cos Inc. raised the wholesale price of a pack of cigarettes by 14 cents per pack, a move that will cost smokers even more at the cash registers. It was the third increase in cigarette prices to distributors in a year.

RJR forecast shipments this year will fall 3 percent to 5 percent as cigarette consumption continues to decline.

Despite the wholesale price increases, shipments of the company's premium cigarettes rose 2.5 percent and by 2.6 percent for its discount brands.

RJR's Camel, Winston and Doral brands benefited from advertising spending to gain market share, Schindler said, its Salem brand lost market share. BACK TO TOP

SBC's Profits Rise 5.6 Percent

SBC Communications, the No. 2 U.S. local telephone company, said today its fourth-quarter profits rose 5.6 percent as sales of wireless telephone and data services surged.

San Antonio, Texas-based SBC said profits, excluding one-time items, rose to $2.0 billion, or 57 cents a share, from $1.9 billion, or 54 cents a share, a year earlier. The results matched Wall Street forecasts compiled by research firm First Call/Thomson Financial.

"Consistency is part of the regional Bells. And in uncertain times, consistency is well-received," said Tim Ghriskey, portfolio manager of the $4 billion Dreyfus Fund.

Including one-time items and accounting changes, SBC's fourth-quarter net income sank 58 percent to $1.3 billion, or 38 cents a share, compared with $3.1 billion, or 90 cents a share, a year ago. Those results reflect its investments to build its data and wireless operations, costs from an employee early-retirement program and other items.

"In 2000, we made the investments and strategic decisions necessary to put SBC in the best position to pursue data and wireless growth opportunities," SBC Chairman Edward Whitacre said in a statement.

Revenues, including its share of sales from its Cingular Wireless joint venture, rose 9.1 percent to $14.1 billion. Data sales surged 44.3 percent to $2.2 billion, while pro-forma wireless service revenues jumped 17 percent to $3.0 billion.

SBC warned in December that its 2001 profits and revenues would fall short of Wall Street expectations. It blamed service problems in its Ameritech unit, the slowing national economy, and its slow entry into the long-distance telephone market.

SBC had said it expects its 2001 earnings per share to grow in the range of 11 percent to 14 percent on revenue growth of between 8 percent and 9 percent. Analysts said SBC reaffirmed those tempered forecasts.

"They were strong in all the areas you'd expect them to be strong — data and wireless. And they appear to be getting strong [long-distance] sales from Texas," Ghriskey said.

SBC added 251,000 high-speed DSL (digital subscriber line) Internet customers in the quarter, bringing its total subscriber base to 767,000 and firming SBC's status as the largest DSL provider among the Baby Bells.

SBC's DSL growth fell below CS First Boston's forecast of 300,000 new subscribers, which the firm said may be due to the delayed roll-out of service in midwestern states of its Ameritech unit. Still, the year-end tally of 767,000 DSL customers exceeded ABN AMRO's forecast of 750,000 subscribers.

Cingular, SBC's wireless joint venture with sister Baby Bell BellSouth Corp., added 814,000 wireless customers, bringing the company's total to 19.7 million. SBC has a 60 percent stake in Cingular, the No. 2 U.S. wireless service provider.

Cingular, through its Salmon PCS LLC affiliate, has bid $2.3 billion in the ongoing federal auction for U.S. wireless licenses. It currently has the highest bid of $409 million for one license in Los Angeles.

SBC said added 547,000 new long-distance customers in Texas during the quarter. It has gained more than 1.4 million long-distance telephone customers in Texas since it launched service in mid-July. SBC on Monday won federal approval to offer long-distance in Kansas and Oklahoma, becoming the first Baby Bell to offer long-distance in multiple states.

"Wireless, DSL and LD [long distance] are all the growth drivers and they all looked strong," said Kevin Roe, a telecommunications analyst at ABN AMRO.

SBC said it expects to file applications with the Federal Communications Commission to enter the long-distance markets in Mississippi and Arkansas this quarter. Applications for California and Nevada will follow in the second quarter.

Under the 1996 Telecommunications Act SBC, and the other Baby Bells created from the 1984 breakup of AT&T Corp., cannot enter the long-distance market in their home markets until they open their local telephone networks to competitors. 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.