Earnings Reports for Jan. 24

Lucent to Cut 10,000 Jobs

Lucent Technologies posted today a first-quarter loss and said it would cut 10,000 jobs, or 10 percent of its work force, as part of a plan to reduce expenses by $2 billion and recover from recent profit shortfalls and product development missteps.

It said it would take a charge in the second quarter of $1.2 billion to $1.6 billion to cover a restructuring plan that will include the job cuts, as well as the elimination of some product lines and the write-down of some assets.

Lucent, the world's largest telecommunications equipment maker, said it lost $1.02 billion, or 30 cents a share, in its fiscal first quarter, ended Dec. 31, compared with a profit of $1.08 billion, or 33 cents a share, a year ago.

The loss was deeper than Wall Street's already reduced expectations of a loss of 27 cents a share, according to research firm First Call/Thomson Financial.

Its quarterly pro forma revenues from continuing operations fell 26 percent to $5.84 billion.

Lucent slashed its growth outlook several times last year as it fell behind rivals in the key optical networking market, and struggled with manufacturing constraints and declining demand for its core telephone equipment products.

The turmoil, which led to the ouster of Lucent Chairman and Chief Executive Richard McGinn in October, dragged Lucent's stock down 60 percent over the past year.

The job cuts, which were widely expected, will primarily reduce duplicated marketing, sales and administrative jobs, Lucent said, adding that it will continue to hire workers in high growth areas of its business. The company has about 106,500 workers, excluding 16,500 workers from its Agere Systems microelectronics unit, which will be spun off.

As part of the restructuring, Lucent said it will reduce capital spending by $400 million by the end of the fiscal year. It also will significantly expand its previously announced plans to use contract manufacturers, which will result in about 6,000 fewer positions by the end of the fiscal year.

To ensure that its cash flow needs are adequately met, Lucent said it got a new $4.5 billion credit facility arranged by J.P. Morgan and Salomon Smith Barney. BACK TO TOP

Chevron Smashes Expectations

Cheron, the No. 2 U.S. oil company, said today fourth-quarter earnings rose 88 percent, easily surpassing Wall Street expectations, driven by sharply higher oil and natural gas prices, a modest rise in production volumes and better refining and marketing results.

Chevron, which is acquiring rival Texaco Inc., said earnings, excluding special items, rose to $1.54 billion, or $2.39 per diluted share, from $819 million, or $1.24 per diluted share, a year earlier. Revenues rose 23 percent to $13.5 billion.

After stripping out foreign currency losses of $8 million, earnings excluding special items came to $2.41 per share. Analysts had expected earnings per share on the same basis of $2.21, according to First Call/Thomson Financial.

Chevron's stock price appears to have drawn little benefit from strong oil and gas prices. The shares are off some 6 percent so far this year and fell 2.5 percent last year, when investors showed little interest in integrated oil stocks as they chased high-flying technology issues.

The bulk of Chevron's earnings came from its "upstream" exploration and production business, which benefited from some of the highest oil and natural gas prices in a decade and a 3 percent increase in production volumes.

Operating earnings from exploration and production rose 53 percent to $1.26 billion.

The average price Chevron received for its crude oil in the United States rose 33 percent to $28.75 a barrel, compared with the fourth quarter of 1999. The average price it received for its natural gas in the United States more than doubled to $5.86 per thousand cubic feet.

Chevron said its "downstream" refining and marketing business, which transforms crude oil into marketable products such as gasoline, posted operating earnings of $336 million, versus a loss of $6 million in the fourth quarter of 1999.

Results from the U.S. downstream business rebounded in the second half of the year as refined product price increases offset the higher costs of higher crude oil feedstocks.

In the fourth quarter Chevron benefited from improved reliability of its U.S. West Coast refineries and stronger margins for jet fuel, diesel fuel and motor gasoline.

Outside the United States, results of Chevron's refining and marketing joint venture with Texaco, Caltex, remained depressed as tough competition in the Asia-Pacific area dampened marketing margins.

Chevron's earnings excluding special items for the whole of 2000 rose to $5.44 billion from $2.29 billion in 1999.

Chairman and Chief Executive Dave O'Reilly said 2000 had been the most profitable year in the company's history, with Chevron earning a return on capital employed of 22 percent.

O'Reilly said Chevron had significantly strengthened its balance sheet in 2000, reducing its debt by $2.7 billion and buying back $1.4 billion of its common shares. BACK TO TOP

High Oil Prices Fuel Success at Texaco

Texaco, the No. 3 U.S. oil company, said today fourth-quarter income more than doubled, beating Wall Street estimates, aided by high crude oil and natural gas prices.

White Plains, N.Y.-based Texaco, which is being acquired by Chevron, said fourth-quarter income before special items rose to $840 million, or $1.55 per share, from $370 million, or 67 cents a share, in the same period a year ago.

Analysts on average were forecasting earnings of $1.51 a share, according to First Call/Thomson Financial, which tracks estimates. Revenues for Texaco rose to $14.4 billion from $10.6 billion a year ago.

Texaco, along with other major oil companies, benefited during the quarter from a run-up in crude oil and natural gas prices to some of the highest levels seen in a decade.

Net income for the period was $545 million, up from $318 million a year ago.

While its daily production fell by 12 percent in the fourth-quarter and 10 percent for the year, partly due to sales of properties, Texaco's exploration and production business still turned in sharply higher results than a year ago.

U.S exploration and production income before special items rose to $547 from $243 million in the corresponding period last year, Texaco said. International income from the same business rose to $271 million from $195 million a year ago.

Before special items, its refining and marketing business also posted better results, helped by stronger profit margins on fuels such as gasoline and heating oil.

But its refining and marketing business will likely go through dramatic changes, particularly in the United States, when it completes its merger with Chevron, announced last year.

It will likely have to unwind its U.S. refining and marketing joint-ventures with Royal Dutch/Shell Group and Saudi Arabia's national oil company to satisfy antitrust concerns. Texaco has begun negotiations with both companies about the ventures.

"The integration teams continue to make good progress toward the goal of completing the merger in the mid-year time frame and positioning the new company, ChevronTexaco, as one of the world's largest and most competitive energy companies," Chairman and Chief Executive Officer Peter Bijur said in a statement.

If the Chevron deal is completed, the combination will be the world's fourth-largest publicly traded oil company, the latest in a string of oil companies created through consolidation. Others include Exxon Mobil Corp. and BP Amoco Plc.

In part by cutting its combined work force by 57,000 by 7 percent, or 4,000 employees, ChevronTexaco expects to slash costs by some $1.2 billion.

Capital and exploratory expenditures were $4.2 billion for the year 2000, compared with $3.9 billion for 1999.

Total upstream expenditures increased by 12 percent, the company said. BACK TO TOP

Exxon Mobil's Profits Surge

Fourth quarter net income at Exxon Mobil more than doubled, helped by surging oil prices, as the company easily surpassed Wall Street's expectations.

For the three months ended Dec. 31, Exxon Mobil earned $5.22 billion, or $1.49 a share, compared with $2.28 billion, or 65 cents per share, the company said today.

Excluding items in both periods, Exxon Mobil earned $5.12 billion, or $1.46 per share, nearly double the $2.71 billion figure, or 77 cents per share, of a year earlier.

Those figures include one-time gains and the effects of Exxon's $85 billion acquisition of Mobil, which was completed in December 1999. The company took a $215 million charge for merger-related expenses but also a gain of $315 million from asset sales, which regulators required as a condition of approving the giant merger.

Revenue was $64.13 billion, up from $54.58 billion a year earlier.

Analysts surveyed by First Call/Thomson Financial were expecting $1.31 per share.

The company said the improved profits were due mainly to exploration and production operations outside the United States, especially in the North Sea, the Gulf of Mexico, Venezuela and Equatorial Guinea in Africa.

But refining profits — which often suffer from higher crude oil prices — also improved as a glut of gasoline and other refined products diminished, the company said.

"These results reflect historically high crude oil and natural gas prices, higher refining margins and further improvements in operating efficiencies, including those from merger synergies," said chairman Lee R. Raymond.

For the full year, Irving, Texas-based Exxon Mobil earned $17.72 billion, or $5.04 per share, on revenue of $232.7 billion. Last year, the oil giant earned $7.91 billion, or $2.25 per share, on revenue of $185.53 billion.


Materials Cost and Strong Dollar Hurt DuPont

High costs for oil and other raw materials dragged down DuPont's fourth-quarter earnings, though the chemical maker still managed to beat Wall Street's expectations.

DuPont earned $261 million, or 25 cents per share, compared with a loss of $1.42 billion, or $1.36 per share, in the year-ago period, the company said today.

Excluding one-time items, DuPont earned $494 million, or 47 cents per share, compared with $583 million, or 55 cents per share, in the same period a year ago. The 1999 results in particular were affected by DuPont's $7 billion spinoff of its Conoco subsidiary.

Fourth-quarter revenue was $6.26 billion, down from $7.70 billion in the fourth quarter of 1999.

DuPont edged Wall Street expectations of 46 cents per share, according to First Call/Thomson Financial.

Raw materials costs soared by $1.3 billion during the year, mostly on the price of crude oil. Like other chemical manufacturers, DuPont is heavily dependent on oil, natural gas and other petroleum byproducts.

The cost of raw materials soared by $250 million in the fourth quarter alone, the company said.

"Our employees worldwide have done a tremendous job countering some of the worst conditions in our industry in a decade," said Charles O. Holliday Jr., DuPont chairman and chief executive. "Six segments had higher revenue and five improved earnings versus last year, a very solid performance."

An 11 percent slump in U.S. sales was partly offset by a 2 percent gain in overseas sales, but overall sales volume saw a decline of about 5 percent in the quarter.

A strong overseas dollar also hurt the company's profits, with the weak euro reducing quarterly earnings by 5 cents a share and by 15 cents a share for the year, the company said.

For the year, DuPont earned $2.31 billion, or $2.21 per share, on revenue of $29.27 billion. In the year-ago period, DuPont earned $7.69 billion, or $7.08 billion, on revenue of $27.89 billion.


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 down-sizing 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, Illinois-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 nonbeef 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 U.S., 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.