Earnings Reports for Oct. 25

AT&T Tops Estimates; Announces Restructuring

AT&T, the biggest U.S. long-distance telephone company, said today its third-quarter earnings fell 12 percent, but topped Wall Street’s reduced expectations, as declining long-distance sales to residential customers offset strong wireless and data sales.

As New York-based AT&T unveiled a complex reorganization, the company said profits, excluding one-time items, fell to $1.44 billion, or 38 cents a share, compared with $1.63 billion, or 50 cents a share, a year ago.

The results beat Wall Street’s tempered forecast of 36 cents a share, according to research firm First Call/Thomson Financial. AT&T in May cut its growth forecasts for the rest of the year, citing faster-than-expected declines in sales of telephone services to residential customers and sluggish sales to corporate customers.

Including one-time items, AT&T’s third-quarter net income fell 19 percent to $1.32 billion, or 35 cents a share. Revenues rose 4 percent to $16.98 billion.

Sales of communications services to consumers fell 11 percent to $4.67 billion as AT&T continued to suffer from increased competition and price wars. Sales to corporate customers rose 2.5 percent to $7.11 billion. The company added 750,000 wireless subscribers from a year ago. Cable-based telephone subscribers totalled 350,000 in the third quarter, up from 224,000 in the second quarter. BACK TO TOP

Viacom’s Profits Fall

Viacom reported today third-quarter earnings that topped expectations amid strong advertising growth at the media and entertainment giant, but profits were down from a year earlier, reflecting higher taxes and costs from its CBS purchase.

The New York-based company, whose properties include the MTV cable network and Paramount Studios, said net income dropped to $33 million, or 2 cents a share, from $97 million, or 14 cents, in the same period last year.

Analysts on average had expected the company to post a loss of 2 cents a share, according to First Call/Thomson Financial.

Revenues rose 79 percent to $6 billion from $3.3 billion, powered by strong advertising revenue growth, especially at CBS, the broadcaster that scored a big hit with the TV show Survivor, and its cable and radio operations.

“The quarter was fueled by double-digit ad sales growth across the board, spurred by such ratings triumphs as CBS’ Survivor, which generated significant prime-time audience gains at CBS, and MTV’s Video Music Awards, this year’s highest-rated cable entertainment program,” Sumner Redstone, Viacom chairman and chief executive said in a statement.

Pro forma revenues, which take into account the CBS acquisition, rose 7 percent to $6 billion from $5.6 billion in the third quarter of 1999. Pro forma revenues at the company cable networks rose 13 percent to $1 billion, led by double-digit increases in ad revenues at MTV.

Infinity Broadcasting, in which Viacom acquired a majority stake when it took over CBS, posted pro forma revenues of $1 billion, up 12 percent on the year

Television pro forma revenues were also boosted by strong ad revenue growth, up 3 percent to $1.8 billion.

The company’s entertainment division saw more moderate growth of 2 percent to $792 million. Merrill Lynch analyst Jessica Reif Cohen had forecast slower entertainment revenue growth because of weaker attendance at Paramount Parks because of rainy weather conditions.

Third-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) rose to $1.4 billion from $540 million a year earlier. It said it was on track to deliver full-year EBITDA of $5 billion and expects to achieve EBITDA growth of 20 percent for all of 2001.

Analysts say Viacom has positioned itself well to gain major advertising revenue from shows like “Survivor,” which should protect it from an expected slowdown in the advertising market in the fourth quarter and next year.

Shares of Viacom closed up 7/16 at $56-1/2 on the New York Stock Exchange on Tuesday. They have traded at a 52-week low of $41-11/16 and a 52-week higher of $76-1/16. BACK TO TOP

DuPont Lowers Outlook

DuPont reported third-quarter earnings of 51 cents a share today, matching the expectation of analysts, but lowered its outlook for the year, warning that rising oil prices will hurt profits.

Analysts surveyed by First Call/Thomson had predicted earnings of 51 cents per share, 8 cents lower than the same period last year, for the nation’s largest chemical company.

For the first nine months of the year, DuPont reported earnings of $2.26, compared to $2.02 for the same period last year.

Charles O. Holliday Jr., DuPont chairman and chief executive, cited rising raw material costs and a slowing global economy in issuing the lowered earnings outlook for the rest of 2000.

The announcement marked the second time in two months that DuPont has lowered its outlook. In June, the company predicted earnings of $3.01 for the year, but lowered its estimate in September to between $2.85 and $2.95.

Holliday said today that $2.85 is the best the company can expect for the year — and warned it may be lower.

“We are cautious about the prospects for top-line growth in the fourth quarter,” Holliday said.

DuPont stock closed Tuesday at $42.88, up $2.19, on the New York Stock Exchange.

Like other large U.S. manufacturers, DuPont is struggling with skyrocketing prices for oil and natural gas. DuPont buys about $11 billion worth of raw materials annually, about 40 percent of which are oil and gas.

DuPont’s largest users of the hydrocarbons are its nylon and polymer plants.

Holliday also warned that a strong U.S. dollar overseas and the end of a sales promotion program in the company’s pharmaceutical division could hurt DuPont earnings in the last three months of the year.

Third quarter income from continuing operations was $537 million, compared to $625 million in the third quarter of 1999, a drop of $88 million or 14 percent.

Third quarter 2000 consolidated sales of $6.4 billion were flat versus third quarter 1999.

The company reported higher sales volume, particularly in the Asia Pacific market, and higher selling prices, but those were offset by the higher raw material costs. BACK TO TOP

Clorox Q1 Net Rises 13%

Consumer products company Clorox said today that net income rose 13 percent in its fiscal first quarter, as strong sales of home care products and record summer demand for Kingsford charcoal helped boost results.

The maker of Clorox bleach, Formula 409 cleaner and Hidden Valley Ranch salad dressing said net income before a one-time charge was $100 million, or 42 cents a share, in the quarter ended Sept. 30. Including the charge, net income totalled $98 million, or 41 cents a share. Last year the company had net income of $87 million, or 36 cents per share.

Analysts on average had expected the company to report earnings of 41 cents a share, according to market research firm First Call/Thomson Financial. A company spokesman could not be immediately reached for comment.

Oakland, California-based Clorox, which also makes Fresh Step cat litter and Glad plastic bags, said revenue rose 5 percent to $985 million.

First-quarter results were in line with the company’s goals of mid-single-digit revenue growth and low-double-digit earnings growth for the full year, Chairman and Chief Executive Officer Craig Sullivan said in a statement.

BACK TO TOP The company earned $109.1 million, or 69 cents per share, in the third quarter of 1999. But special items then included an after-tax gain of $143.7 million, 90 cents per share, resulting from the completion of the company’s Dunlop joint ventures.

Special items influencing the quarterly results this year were charges of $1.2 million, 1 cent per share, for closing a factory in Italy and a gain of $3.2 million, 2 cents per share, resulting from a property sale in Mexico.

Net income for the first nine months totaled $116.7 million, or 74 cents per share. The 1999 net income through nine months was $200.3 million, $1.26 per share.

Sales for the first nine months of 2000 were $10.5 billion compared with $9.3 billion in the same period of 1999.

Gibara said Goodyear’s earnings in the quarter were approximately 40 cents per share lower than the result would have been if production costs had remained at 1999 levels.

Besides the higher costs for materials and energy, the results also were hurt by costs associated with ongoing manufacturing restructuring in Europe, the further deterioration of the euro’s value versus the U.S. dollar, competitive market conditions and reduced original equipment tire shipments in North America, the company said.

Goodyear also felt the effect of production cutbacks by automobile and commercial truck manufacturers.

Gibara noted Goodyear has reduced some production, cut back on some spending and started several initiatives to increase sales. He said the company is trying to take advantage of the Bridgestone/Firestone recall.

“It is too early to measure the full impact the Bridgestone/Firestone tire recall will have on Goodyear or the industry, both in the original equipment and replacement markets,” Gibara said. “However, consumers are showing more interest in safety and brand quality than price.

“We have a unique opportunity to achieve market share gains that can be sustainable and profitable.”

Goodyear’s North American Tire business has shipped more than 2.5 million tires of the size and type being used to replace the 6.5 million recalled Firestone tires. Goodyear is producing more than 28,000 tires a day to serve as replacements. BACK TO TOP

14% Rise for Schering-Plough

Drug maker Schering-Plough reported today a 14 percent rise in third- quarter profits, matching Wall Street estimates, on strong sales of its blockbuster allergy drug Claritin and the hepatitis C medication Rebetron.

The Madison, N.J.-based company posted net earnings of $591 million, or 40 cents per share, compared with $518 million, or 35 cents per share in the year-ago period. Analysts polled by First Call/Thomson Financial predicted Schering-Plough, which also markets Intron A for cancer, to earn 40 cents per share.

The company reported a 7 percent jump in total worldwide sales to $2.4 billion as Claritin sales rose 10 percent to $787 million. Claritin accounts for nearly a third of Schering-Plough’s sales. The company is aiming to gain both European and U.S. approval for a related allergy drug before its patent over the key chemical in Claritin expires in late 2002.

Combined sales of Rebetron and Intron A, an anti-viral component of Rebetron that also treats other diseases, rose 24 percent to $338 million in the third quarter.

Worldwide sales of the company’s inhaled allergy drugs increased 29 percent to $126 million in the quarter, led by Nasonex, a once-daily nasal spray for allergies, whose sales were up 44 percent at $98 million.

U.S. pharmaceutical sales in the period totalled $1.3 billion, a 5 percent increase. Third-quarter 2000 U.S. sales of the Claritin line were $700 million, up 12 percent.

Global sales of animal health products totalled $176 million in the third quarter, up 9 percent due to the June 2000 acquisition of a majority interest in a joint venture with Takeda Chemical Industries Ltd. in Japan.

Looking ahead, Schering-Plough said it expects earnings per share for 2000 to be in line with the current analyst outlook of $1.64 per share, which would give the drug firm its 15th consecutive year of double digit earnings growth.

Shares of Schering-Plough, the nation’s No. 8 drug maker, closed at $53 on Monday on the New York Stock Exchange, below a year high of $57-3/8 and above a 52-week low of $30-1/2. BACK TO TOP

Qwest Beats the Street

Telephone and data services company Qwest Communications said today its third-quarter operating profits rose a 18.5 percent, beating Wall Street expectations, amid strong growth in sales of data and Internet services.

Qwest, the No. 4 U.S. long-distance telephone company, said profits excluding one-time items rose to $231 million, or 14 cents a share, from $195 million, or 12 cents, a year ago.

The results topped the average Wall Street estimate of 9 cents a share, according to research firm First Call/Thomson Financial.

Including charges related to its recent acquisition of local telephone company U S West and other one-time items, Qwest posted a third-quarter loss of 15 cents a share.

Revenues rose 12.4 percent to $4.77 billion, driven by Internet and data services growth of more than 50 percent.

Earnings before interest, taxes, depreciation and amortization rose 14.3 percent to $1.86 billion. Its profit margin rose to 39.1 percent from 38.5 percent in the year-ago quarter.

The Denver-based company said it remains on track to hit its 2000 revenue target of $18.8 billion to $19.1 billion, and earnings of $7.4 billion before interest, taxes, depreciation and amortization.

Qwest added 38,000 wireless customers during the quarter and said it was on track to meet its year-end target of 800,000 subscribers.

It also met its year-end goal to offer digital subscriber line (DSL) high-speed Internet access service in 72 markets ahead of schedule. Qwest added 38,000 subscribers during the quarter and now has 213,000 DSL subscribers. It expects to have 250,000 DSL subscribers by year-end.

In an effort to cut expenses and streamline its operations following the purchase of U S West, Qwest plans to cut 11,000 jobs, or 16 percent of its work force. About 4,500 jobs were cut by the end of the quarter.

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Halloween Sweetens Hershey

Hershey Foods, the No. 1 U.S. producer of chocolates, said today its third-quarter earnings rose 23 percent, beating the average analyst forecast, boosted by strong back-to-school and Halloween demand for candy.

The maker of Hershey’s bars, Reese’s Peanut Butter Cups and Jolly Rancher candies said net income reached $107.4 million, or 78 cents a diluted share, in the quarter ended Oct. 1, compared with $87.6 million, or 62 cents, in the same period a year ago.

Analysts on average had expected Hershey, based in Hershey, Pa., to earn 76 cents a share, according to a poll by market researchers First Call/Thomson Financial.

Net sales climbed to $1.20 billion from $1.07 billion.

Hershey in September forecast strong sales for the second half of 2000, citing solid demand, a lineup of new products and logistical improvements that better prepared the company for the Halloween season, an important time of the year for sales. Operating problems led to product shortages the previous year.

“Admittedly we were in the depths of our shipping difficulties during last year’s third quarter, but this year our new information system and revamped Eastern distribution facilities were much improved during this period of high demand for our domestic confectionery business,” Kenneth Wolfe, Hershey’s chairman and chief executive, said in a statement.

The company said everyday business was also healthy during the period, on top of the strong back-to-school and Halloween shipments.

Greater sales volumes and favourable commodity costs, primarily for cocoa and milk, boosted operating income despite higher logistics, marketing and administrative costs, Hershey said.

“We expect a good finish for the year, although our challenge, as always, will be to strive for continuous improvement in customer service, while controlling costs and executing effective marketing programs,” Wolfe said.

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Tyco’s Q4 Operating Net Up 40%

Diversified manufacturer Tyco International said today that fourth-quarter operating earnings rose 40 percent, beating Wall Street estimates, on double-digit internal growth, surging electronics sales and the integration of big-ticket acquisitions.

Tyco, which also makes telecom, medical and fire protection products, earned $1.1 billion, or 64 cents a diluted share, before special items, compared with $782.7 million, or 46 cents a diluted share, in the year-ago quarter.

Analysts, on average, were looking for Tyco to earn 63 cents a share, according to First Call/Thomson Financial. Net income rose to $1.9 billion or $1.12 per diluted share from $780.5 million or 46 cents per share in last year’s fourth quarter.

Fourth-quarter sales at Tyco — based in Bermuda, but with headquarters in Exeter, N.H. — rose 25 percent to $7.81 billion, up from $6.22 billion in the year-ago quarter.

Tyco’s electronic operations posted a 66 percent increase in sales from the introduction of new products such as high-speed connectors and wireless components and the integration of three acquisitions, the company said.

Fourth-quarter operating profits from electronics increased 69 percent to $746.8 million on sales of $2.88 billion, the company said.

“Tyco continues to show no signs of slowing down,” Tyco Chairman Dennis Kozlowski said in a statement.

During the quarter, Tyco generated $2.1 billion in net cash from the initial public offering of its majority-owned undersea fiber-optic cable operation TyCom Ltd. Tyco also completed the sale of ADT Automotive for $1 billion in cash. Last week, Tyco completed its $4.2 billion acquisition of St. Louis, Mo.-based Mallinckrodt Inc., a leading maker of disposable medical products.

For the fiscal 2000 year ended Sept. 30, Tyco’s earnings before special charges rose 42 percent to $3.73 billion, or $2.18 per diluted share. Revenues for the year rose 29 percent to $28.93 billion.

Kozlowski said the company’s cash flow of $3.3 billion generated from organic growth and new acquisitions has put Tyco on course for “another solid year in 2001.

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Dial’s Profits Pluge

Consumer products and canned meats maker Dial said today that third-quarter earnings, hurt by lower sales and higher raw material costs, plunged 86 percent even before a restructuring charge.

Profit before the charge was $4.4 million, or 5 cents a share, down from $30.8 million, or 31 cents, a year ago, the maker of Dial soap, Armour canned meats and other products said. Sales fell 6 percent to $411.1 million.

Analysts on average had expected Scottsdale, Ariz.-based Dial, whose management is trying to decide whether to put the company up for sale, to post earnings of 3 cents a share in the quarter. Dial had previously warned that earnings would drop to 3 to 5 cents a share before one-time items, down from earlier analysts’ consensus estimates of 14 cents a share.

Including a $48.7 million charge in the third quarter for severance and restructuring of its speciality personal care business and a joint venture with Germany’s Henkel KGaA, the company reported a loss of $26.2 million, or 29 cents a diluted share. A $4.6 million pretax gain in the third quarter from changes to certain benefit plans partially offset the charge.

The report offered little in the way of new information for investors, as a new management team, lead by chief executive officer Herbert Baum, had already forecast the earnings and the charge.

“I think the jury’s still out,” John Hughes, branded consumer products analyst at Dain Rauscher Wessels, said about investor reaction to the earnings report. “We want to measure this management team.”

Dial announced the charge related to those areas and for severance payments for previous management last week. It also said it cut its dividend in half to strengthen its balance sheet and repay debt. Additional charges are expected in the fourth quarter, with the total expected to reach $60 million to $70 million.

Baum took the helm in August, after the company had issued its third earnings warning for the year. The company has been plagued by acquisitions that have not performed well and by the practice of previous management to sell products at discounts to retailers at the end of quarters to meet sales goals, a process known as trade loading. Under Baum, the company has ended that practice.

Baum has also said that management will decide by the middle of 2001 whether to keep the company independent, sell it, sell parts of it, or form new business alliances.

Gross margin in the third quarter fell to 47.8 percent, before the charge, from 49.7 percent in a year ago. Margin was hit by higher petroleum costs, lower sales and costs resulting from the consolidation of speciality personal care distribution and warehouse facilities.

Total debt at the end of the third quarter was $636.5 million, down $20.5 million from the balance at the end of the second quarter, the company said.

Baum also reiterated Tuesday that the company was comfortable with analysts’ estimates predicting on average earnings of 50 cents a share in 2000, before one-time items.

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Blockbuster’s Winning Quarter

Leading video store chain Blockbuster said today third-quarter cash earnings rose 3 percent, well above Wall Street expectations, on growth in video rentals and international operations.

The Dallas-based company reported cash earnings of $22.6 million, or 13 cents a share, excluding intangible amortization. That compares with $22.0 million, or 14 cents, a year earlier.

Wall Street on average expected 10 cents per share, according to research firm First Call/Thomson Financial.

“It’s a very, very good profitable and growing business,” said David Riedel of Salomon Smith Barney after earnings were announced. He said the company’s position in its core business, video rentals, was virtually unmatched.

Video segment cash earnings, which excludes Blockbuster’s new media area, grew to $33.3 million, or 19 cents a share, for the third quarter, which compares with $22.9 million, or 14 cents a share during the same period last year.

Blockbuster rents videos, DVDs and video games, and operates the world’s largest video rental chain. It also has partnerships with America Online and DIRECTV. Entertainment giant Viacom Inc. took Blockbuster public in August 1999 and owns more than 80 percent of the company.

Including amortization and other items, Blockbuster reported a net loss of $19.3 million, or 11 cents a share, versus $19.1 million, or 12 cents.

Looking ahead, the company also said its New Media unit losses in the fourth quarter would be consistent with prior quarters, and same-store revenues in the period would be in the high single digits in percentage terms. BACK TO TOP

PG&E Reports 38% Rise in Revenue

With $2.9 billion in unrecognized losses looming in the background, PG&E reported today a 38 percent increase in third-quarter earnings that beat expectations.

The San Francisco-based holding company of Pacific Gas and Electric Co. reported net income of $225 million, or 62 cents per share, up from $185 million, or 50 cents per share in the prior year. PG&E’s continuing operations earned $248 million, or 68 cents per share, in the third quarter.

Analysts polled by First Call/Thomson Financial projected earnings of 60 cents per share.

PG&E’s bottom line took a back seat to concerns about whether the company will be able to recoup its losses from California’s soaring electricity prices while a government-mandated rate freeze prevents the utility from passing the costs along to customers.

PG&E said its losses from the electricity price shocks rose from $2.2 billion at the end of August to $2.9 billion at the end of September.

The mounting losses stem from a deregulated market where the energy demands of California’s expanding population and economy have outstripped supply, allowing electricity suppliers to triple and quadruple their prices from 1999. Regulators are also investigating allegations of illegal price manipulation in the market.

PG&E will have to write off those losses unless state regulators reverse their previous rulings and allow PG&E to retroactively bill millions of Northern California customers for the costs. If the company has to absorb the electricity losses, PG&E’s stock probably would be ravaged.

The California Public Utilities Commission last week provided PG&E with a reprieve by agreeing to reconsider the issue. PG&E and another major utility, Southern California Edison Co., are expected to provide further details about their proposed solution in documents scheduled to be filed with the PUC on Wednesday.

Consumer activists argue that PG&E should have to foot the entire bill for the higher electricity prices because the company has made billions of dollars by selling off assets as part of California’s energy deregulation. PG&E said consumer groups are misinterpreting the company’s finances.

In a conference call today, PG&E executives sought to strike a conciliatory tone to reassure both anxious customers and investors.

On the one hand, the company said, it would continue to essentially finance its customers’ bills. PG&E said it has borrowed between $700 million and $800 million to buy electricity from wholesalers so far and has applied for approval to raise its credit limit by an additional $2 billion.

On the other hand, PG&E executives stressed they are working furiously with state and federal regulators to devise a plan that will ease the company’s financial burden. In the conference call, the executives indicated they hoped some sort of action might be taken before the end of the year.

“We believe the immediate and long-term solutions are coming into focus,” PG&E Chairman Robert Glynn said. “In summary, the right people are working on the right solutions.”

Through the first nine months of the year, PG&E earned $753 million, or $2.09 per share, up from $538 million, or $1.46 per share, in the comparable 1999 period.

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Sluggish Sales Cost Hasbro Hasbro, the No. 2 U.S. toy maker, reported today that its profits fell 84 percent due to sluggish sales and mounting losses in its interactive operations.

Hasbro said net income fell to $13.8 million, or 8 cents a diluted share, compared with $85.2 million, or 43 cents, for the same quarter a year ago.

Analysts lowered their expectations to 7 cents a share for the quarter, according to market research firm First Call/Thomson Financial. Hasbro warned last week that its performance would fall well short of previous estimates largely because of a sharp slowdown in sales of Pokemon and Star Wars products. It also said it was slashing its work force by about 5 percent.

Worldwide net revenues dropped to $1.07 billion from $1.10 billion in the year-ago period.

“Even with challenging comparisons against last year’s record results, I’m not pleased with our third-quarter performance,” Hasbro Chairman Alan Hassenfeld said in a statement.

Hasbro’s most recent outlook for full-year 2000 earnings per share was 40 cents to 50 cents, before $140 million to $170 million in pretax charges.

Hassenfeld said the company was evaluating the fourth quarter before providing a revenue and earnings outlook for 2001.

Earnings in the third-quarter included a pretax loss of $6 million from Internet games operation Games.com. Its interactive division did not live up to already-reduced expectations, and Hasbro said last week it was exploring strategic alternatives for the business.

Pokemon toy demand in the U.S. was soft, but strong internationally, the company said. Revenues from Star Wars toys are expected to be minimal in 2000.

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U.S. Bancorp Meets Estimates

Regional bank U.S. Bancorp said today its third-quarter operating earnings rose 0.5 percent, in line with expectations, as loan volume increased but expenses did too.

Minneapolis-based U.S. Bancorp, which this month announced it was being bought by rival Firstar Corp. in a stock deal worth almost $20 billion, earned $410.9 million, or 55 cents a diluted share, in the third quarter, excluding one-time merger charges and profits from securities sales. That compares with $409 million, or 56 cents a share, in the year-earlier period.

Results met Wall Street forecasts of 55 cents a share, according to market research firm First Call/Thomson Financial.

The bank’s net profits, including $9.6 million in merger charges and one-time securities transactions, rose to $401.3 million, or 54 cents per share, from $396.4 million, also 54 cents per share.

U.S. Bancorp’s provision for loan losses in the third quarter rose 22 percent to $173 million. Net interest income, which includes the profit the bank makes from loans, rose 4.5 percent to $883 million as loan volume continued to grow despite higher interest rates.

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Quaker Oats Q3 Profit Up 16%

Quaker Oats, maker of hot and cold cereals, said today its third-quarter earnings rose 16 percent, beating the average analyst forecast, on continued robust demand for its Gatorade sports drink.

The company also said it expects full-year 2000 earnings per share growth before items in the range of 20 percent or slightly better.

The Chicago-based food company, whose stable of products includes breakfast bars, Rice-A-Roni side dishes and Aunt Jemima pancake mixes and syrup, said earnings rose to $159.2 million, or $1.15 per diluted share, in the quarter. That compares with $137.3 million, or $1.01 a diluted share, excluding unusual items in the same period a year ago.

Analysts on average had expected the company to earn $1.11 a share, according to First Call/Thomson Financial, which tracks earnings data.

Third-quarter net sales rose to $1.48 billion from $1.38 billion a year ago.

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Gillette’s Profits Fall; Names New CEO

Gillette today reported its third-quarter earnings fell 1 percent, meeting Wall Street’s estimates, as currency problems plagued the consumer products giant.

The Boston-based maker of razors and blades, Oral B toothbrushes and Duracell batteries, also said Chairman and Chief Executive Michael Hawley was retiring immediately. Edward Degraan was named acting chief executive and Richard Pivirotto was named non-executive chairman of the board.

Gillette posted third-quarter earnings of $350 million, or 33 cents a share, from continuing operations, compared with earnings of $355 million, or 32 cents per diluted share for the same period in 1999.

Analysts surveyed by First Call/Thomson Financial had estimated Gillette would earn 33 cents a share in the third quarter.

The company has had a string of disappointing earnings reports dating back to 1999, blaming a combination of foreign exchange rates and proper inventory stocking.

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AHP’s Profits Rise 18% Before Charge

American Home Products posted today a steep rise in quarterly operating profits, matching analyst expectations, but the No. 5 U.S. drug maker said it would have to set aside additional funds for its diet drug settlement for which it has already paid billions in the “fen-phen” case.

The Madison, N.J.-based maker of Advil, Robitussin and the oestrogen replacement drug Premarin reported net income of $762 million, or 58 cents per share, in the third quarter vs. a net loss of $2.87 billion, or $2.20 cents, in the year-ago period.

The year-ago loss mainly reflected a $4.75 billion litigation charge for a settlement related to the diet drugs Redux and Pondimin. Excluding this charge from the 1999 third-quarter results, income from continuing operations in the latest quarter increased 18 percent to $762 million from $645 million.

Analysts on average had estimated that the company, whose Wyeth-Ayerst unit will pay the U.S. government $30 million for violations at two plants, would post earnings of 58 cents per share, according to research firm First Call/Thomson Financial.

Looking forward, AHP said it expects additional reserves will be required in the diet drug settlement. It said that though it is still unclear how much that will amount to, AHP expects it to be lower than the $4.75 billion recorded in the 1999 third quarter.

A spokesman for the company declined to specify a range of the amount of reserves that would be used.

Patients typically combined either Pondimin or Redux with another diet suppressant called phentermine to make the “fen-phen” diet cocktail. AHP recalled Pondimin and Redux in 1997 after some of the 6 million Americans who had taken fen-phen developed heart problems, including leaky valves.

Overall net sales increased 13 percent from the same quarter last year.

Worldwide pharmaceutical sales increased 14 percent for the quarter, sparked by higher revenues from recently approved pneumococcal vaccine Prevnar, meningitis treatment Meningitic, arthritis treatment Enbrel and ulcer medicine Protonix. Sales of Effexor XR, for which American Home Products received an expanded indication, also showed strong growth.

Excluding the negative impact of foreign exchange rates, worldwide pharmaceutical sales increased 17 percent for the 2000 third quarter.

Global consumer health care sales increased 7 percent for the quarter, as sales of the Centrum family of vitamin products rose. However, the company experienced a sales slowdown for cold, cough and allergy products, as well as for pain reliever Anacin.

Excluding the effect of weak foreign currencies, worldwide consumer health care sales increased 8 percent for the quarter.

“The double-digit sales and earnings growth through the first three quarters of 2000 have been driven by increased demand for franchise products and enhanced by an impressive number of new products introduced into the marketplace,” said Chairman and Chief Executive Officer John Stafford in a statement. BACK TO TOP

Raytheon Meets Expectations

Raytheon’s third-quarter earnings met Wall Street’s expectations, reversing a loss from the year-ago period, helped by an increase in aircraft deliveries.

For the three months ended Sept. 30, Raytheon earned $105 million, or 31 cents per share, up from a loss of $163 million, or 48 cents per share in the year-ago period.

Earnings from continuing operations were $133 million, or 39 cents per share, in line with a consensus estimate from analysts surveyed by First Call/Thomson Financial.

The Lexington, Mass.-based aerospace and defense company lost $89 million, or 26 cents per share, from continuing operations in the year-ago period, in part due to charges of $464 million, or 84 cents per share.

Revenue rose to $4.16 billion, up from $4.12 billion a year ago.

Sales in most divisions were similar to a year ago. The Electronic Systems division reported sales of $1.9 billion, down from $2.0 billion.

Raytheon Aircraft Company, a division the company is reportedly trying to sell to reduce its debt burden, recorded sales of $749 million, up 6 percent from a year ago due to higher aircraft deliveries.

For the nine months ending Oct. 1, Raytheon recorded net sales of $12.56 billion, down 4 percent from $13.02 billion over the same period last year. Raytheon has a net loss for the first nine months of the year of $23 million, compared with earnings of $332 million in the year-ago period.

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Mattel’s Profits Fall

Mattel, in the midst of a restructuring and under new leadership, said its profit fell 22 percent in the third quarter because of declining sales.

The company said today it earned $174.3 million, or 41 cents per share, from continuing operations in the quarter ended Sept. 30 as compared with profits of $222.2 million, or 52 cents per share in the same period last year.

The results were in line with estimates of analysts surveyed by First Call/Thomson Financial.

Sales increased by 2 percent in the United States, but fell 5 percent in international markets, the company reported. Sales of the company’s two largest brands — Barbie and Fisher-Price — increased during the quarter.

Mattel reported its earnings the day after the sale of its money-losing interactive toy division, The Learning Co.

Mattel took a one-time charge of $441 million as the result of the sale, but said the sale would save it $1 million a day in operating losses.

The company’s disastrous experience with The Learning Co. cost former chief executive Jill Barad her job. Barad was replaced in May by chief executive Robert A. Eckert.

The company also took a restructuring charge of $74 million, or 18 cents per share. Including one-time charges, the company lost $336.8 million, or 79 cents per share, in the quarter.

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U.S. Airways Loses $30 Million in Q3

U.S. Airways, the No. 6 U.S. airline, said today it lost $30 million in the third quarter, more than expected, amid tough competition and fuel costs 75 percent higher than a year earlier.

Arlington, Va.-based US Airways, which has agreed to be bought by United Airlines parent UAL for $4.3 billion, said it lost 45 cents a share, compared with a loss of $85 million, or $1.19 a share, in the period a year earlier, when the carrier suffered from a high degree of cancellations because of bad weather and a slowdown by mechanics.

Analysts had on average forecast that US Airways would lose 19 cents a share in the recent quarter, according to First Call/Thomson Financial.

Revenues rose 13 percent, to $2.38 billion from $2.10 billion a year earlier.

US Airways shares closed at $32-1/4 on Tuesday, down 9/16, despite the $60 a share offer price in the UAL deal, amid widespread doubts that regulators will allow the deal to close as envisioned.

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Wachovia Will Cut Jobs Southeast U.S. regional bank Wachovia reported today a 20 percent drop in third-quarter net income because of merger costs and charges related to a sweeping restructuring plan, but operating results met Wall Street expectations.

Excluding merger costs and restructuring charges, the Winston-Salem, N.C.-based bank’s earnings were up about 4 percent to $270.2 million, or $1.32 a share. Including the charges, Wachovia earned $205.3 million, or $1.00 a diluted share, in the third quarter. That compares with reported net income of $257.5 million, or $1.25 a share, a year ago.

Wall Street was expecting the company to post operating earnings of $1.32 a share, according to market research firm First Call/Thomson Financial. Wachovia, which is the process of cutting 1,800 jobs as it revamps its operations, said pre-tax restructuring charges and merger-related costs totalled $99.8 million in the third quarter. The bank said the rest of the restructuring charges, about $30 million, will be taken in the next two quarters.

Wachovia’s provision for loan losses in the third quarter was $124 million, up from $76.8 million during the same period last year. Net interest income, after the provision for loan losses, fell 6 percent to $506.8 million.

The bank holding company in June warned investors that rising interest rates would hurt second-quarter and full-year profits. In September it said its president and chief operating officer, G. Joseph Prendergast, would retire after the end of this year.

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Visteon Earnings Fall

Third-quarter earnings at auto parts supplier Visteon Corp. fell 69 percent due to price and production cuts by its former parent, Ford Motor Co.

Visteon said its earnings totaled $48 million, or 37 cents a share, for the three months ended Sept. 30, compared with $155 million, or $1.19 a share, in the year-ago period.

The results equaled Wall Street expectations that Visteon had lowered in August, according to analysts surveyed by First Call/Thomson Financial.

Revenues fell 4 percent, from $4.6 billion to $4.4 billion.

Visteon attributed the earnings decline to a 5 percent price cut given to Ford before being spun off as a separately traded company. Ford accounted for 83 percent of Visteon’s business in the third quarter, Visteon’s first full quarter on its own since the spinoff in June.

Visteon also was hurt by the shutdown at three Ford factories to shift tires from new cars to replacing 6.5 million recalled Firestone tires. The parts maker also said the weakness of the euro against the dollar dragged on profits as well.

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The New Brunswick, N.J.-based maker of Band-Aids and Tylenol, reported net income of $1.26 billion, or 89 cents per share, vs. about $1.11 billion, or 78 cents per share in the same quarter of 1999.

Analysts had predicted the company, which is one of the 30 companies in the Dow Jones industrial average, would earn 88 cents per share, according to research firm First Call/Thomson Financial.

The company reported a 4.6 percent jump in total sales to $7.2 billion, as sales surged for drugs such as Procrit/Eprex for anaemia, Risperdal, an antipsychotic medication, transdermal patch Duragesic, and Remicade for rheumatoid arthritis and Crohn’s disease.

Shares of Johnson & Johnson closed at $96-15/16 on Monday on the New York Stock Exchange, below a 52-week high of $106-7/8 and above a year low of $66-3/16.

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Delta Air Lines Falls 3 Percent

Delta Air Lines said today its earnings before one-time items fell 3 percent in the quarter ended in September, as higher fuel costs overcame strong demand at the No. 3 U.S. airline.

Atlanta-based Delta said it earned $273 million, or $2.08 a share, compared with $282 million, or $1.91 a share, a year earlier, before one-time items in both periods. Earnings per share rose as operating earnings fell, as Delta had fewer outstanding shares in the recent quarter.

Analysts on average expected the company to earn $2.06 a share before one-time items, according to First Call/Thomson Financial. Delta said the analysts’ consensus was $2.05. With one-time items, including charges to reflect the declining value of equity instruments and premiums paid on fuel hedge contracts, it earned $133 million, or $1.01 a share.

Revenues rose to $4.35 billion, from $3.83 billion a year earlier.

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Wells Fargo Posts Record Profits

Wells Fargo, the No. 7 U.S. bank holding company, said today its third-quarter profits rose 11 percent to a record on gains in investments and loan growth.

The San Francisco-based bank, which has about $240 billion in assets, also said excluding accounting for its acquisition of Utah bank First Security, it was confident it would meet its cash earnings target of $2.91 a share this year.

Wells earned a record $1.07 billion in the third quarter this year, or 64 cents a diluted share, compared with $962 million, or 57 cents a share, in the year-ago quarter. Wall Street had expected the bank to earn 64 cents a share in the quarter, according to First Call/Thomson Financial, which tracks analysts’ estimates.

Wells Fargo’s results rose even as higher U.S. interest rates have hampered banks’ lending profit growth. Rate increases make it more expensive for banks to borrow to fund loans, and also can push borrowers to default, raising concerns about credit quality.

The U.S. Federal Reserve raised rates six times from June last year to May this year to keep inflation at bay. But banks may have some relief because the Fed appears to be done increasing rates further for now.

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Knight Ridder Falls Flat

Newspaper publisher Knight Ridder reported today flat third-quarter net income amid slower advertising demand and rising newsprint prices.

The publisher of the San Jose Mercury News and the Miami Herald said in a statement its net income was off slightly at $76.1 million compared with $76.2 million a year before — although diluted earnings per share rose to 87 cents from 78 cents as shares outstanding fell. Knight Ridder said it bought back 2 million of its shares during the quarter and was left with 86 million shares at Sept. 30.

Analysts on average had expected the San Jose, Calif.-based company to post earnings of 84 cents a share, according to research firm First Call/Thomson Financial.

Revenues were up 3.4 percent at $617.3 million from $596.9 million, amid soft demand for advertising,particularly in retail and classified.

Looking ahead,the company said it expected to post earnings per share of between $1.05 and $1.10 in the fourth quarter, which includes the costs of its purchase of job search Internet site Career Builder Inc. with publisher Tribune Co. for about $190 million. For the full year, it said it is comfortable with estimates of $3.65 to $3.70 per share

Knight Ridder’s shares closed at $44-1/4 on the New York Stock Exchange on Monday, much closer to their 52-week low of $44-1/8 than to their 52-week high of $65. BACK TO TOP

Coca-Cola Bottles Solid Profits

Coca-Cola Enterprises, posted a third-quarter profit today that beat Wall Street targets despite weakness in the soft drink bottler’s North American and European markets.

Atlanta-based Coca-Cola Enterprises earned $130 million, or 30 cents a share, in the third quarter of 2000, which included a $20-million gain from an insurance recovery related to a product recall from the 1999 contamination scare in Europe.

Excluding the gain, Coca-Cola Enterprises earned 27 cents a share in the third quarter, compared to a profit of $103 million, or 24 cents a share, in the same period last year.

Analysts had on average expected Coca-Cola Enterprises to earn 26 cents a share in the third quarter, according to First Call/Thomson Financial, which tracks consensus data.

The bottler said unit consolidated physical case bottle and can volume, a key measure of health in the soft drink bottling industry, fell 1.5 percent on a comparable basis in the quarter. Volumes dipped 1.5 percent in the company’s North American and European markets.

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Philip Morris Meets Expectations

Tobacco and food giant Philip Morris reported today a 6.8 percent rise in underlying third-quarter earnings, meeting analysts’ expectations, despite the negative impact of overseas currencies, particularly the euro.

New York-based Philip Morris, the world’s largest cigarette maker with the top-selling Marlboro brand, said profits rose to $2.24 billion, or 99 cents per diluted share, from $2.10 billion, or 87 cents, a year ago.

“Philip Morris’ business outlook remains robust,” Chairman and Chief Executive Officer Geoffrey Bible said in a statement. “Despite the current adverse rates of foreign exchange, principally the euro, we project that underlying earnings per share for the full year 2000 will be $3.71, up 12.4 percent versus 1999.”

Underlying earnings exclude unusual items. Analysts on average expected the company, which also operates Kraft Foods Inc. and the Miller Brewing Co., to earn 99 cents per share, according to First Call/Thomson Financial. Analysts expect Philip Morris to earn $3.71 for the full year.

Third-quarter underlying operating revenues rose 1.1 percent to $20.03 billion from $19.81 billion a year earlier, despite a negative currency impact of $630 million, Philip Morris said. Its U.S. cigarette shipment volume in the second quarter slipped 1.3 percent to 54 billion cigarettes versus an industrywide decline of 3.5 percent to 107.2 billion cigarettes, Philip Morris said.

Schwab’s Net Earnings Down

Charles Schwab, the No. 1 U.S. discount and Internet broker, said today its third-quarter revenue jumped 30 percent but that profits fell slightly due to acquisition related charges and a seasonal slowdown in stock trading volumes.

San Francisco-based Schwab, which has 7.4 million brokerage accounts and more than $1 trillion in assets, reported a net income of $142.3 million, or 10 cents per share, in the third quarter compared with a proforma profit of $144.2 million, or 11 cents, in the same period last year. Revenue rose 30 percent to $1.32 billion.

Excluding $23 million in acquisition and other charges, Schwab’s quarterly profit rose 15 percent to $165.7 million, or 12 cents per diluted share.

The operating results matched Wall Street’s lowered expectations calling for the company to earn 12 cents per share, according to data compiled by market research firm First Call/Thomson Financial.

Schwab added $41 billion in assets during the quarter, up from $25 billion last year, propelling the brokerage’s total client assets past the $1 trillion mark. The firm said it opened 281,000 new accounts during the quarter, about the same as the 282,000 it opened last year but down from 400,000 in the second quarter.

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Revenues at FleetBoston Up 59 Percent

FleetBoston Financial, the No. 8 U.S. bank holding company, posted today a 10 percent rise in third-quarter operating earnings, meeting Wall Street estimates, due to a rise in capital markets revenues.

Fleet, which has operations ranging from consumer banking to share dealing, has been buying banking and securities firms to expand its business offerings and keep up with a recent wave of consolidation in the financial services sector. Revenues from capital markets operations grew 59 percent to fuel its profit gain.

Fleet, which owns brokerage firm Quick & Reilly, reported operating earnings of $782 million, or 84 cents a diluted share. That compares with profits of $711 million, or 74 cents a share, a year ago.

Including the gains related to the sales of certain deposits, loans and merger-related expenses, the company posted net income of $841 million, or 90 cents a share. Operating earnings were in line with consensus analyst estimates of 84 cents a share, according to market research firm First Call/Thomson Financial.

“Our overall franchise is very well-positioned, given the growth nature of our underlying businesses, coupled with a strong balance sheet,” president Chad Gifford said in a statement.

Fleet’s noninterest income, excluding one-time gains, grew 17 percent to $2.0 billion, driven by the 59 percent growth in capital markets revenues. Revenues from capital markets activities increased to $749 million, while investment services revenue increased 10 percent to $399 million.

Noninterest revenues made up 55 percent of total revenues, up from 50 percent of total revenues a year ago. Fleet’s operations range from buying and selling shares on stock exchanges to its Robertson Stephens investment banking arm.

Net interest income, which include revenues from traditional banking practices like lending, slipped nearly 6 percent to $1.6 billion. Fleet blamed the decline on the loss of business stemming from the sales of deposits and loans. It sold about $5 billion of deposits and $2 billion of loans in the third quarter.

Nonperforming assets as of Sept. 30 were $1.0 billion, or 0.92 percent of total loans, compared with $950 million, or 0.84 percent of loans as of June 30. The provision for credit losses grew to $300 million, up from $228 million in the year-ago quarter.

Fleet on Oct. 2 agreed to buy regional bank Summit Bancorp in a deal that would create New Jersey’s largest bank and expand its reach in the U.S. Northeast. In July Fleet agreed to buy New York Stock Exchange specialist firm M.J. Meehan & Co. LLC, which would expand its market-making capabilities to the common stock of 433 companies.

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Caterpillar’s Flat Third-Quarter

Caterpillar, the world’s largest maker of earth-moving equipment, said today it expected slight rises in revenue in 2000 and 2001 and reported its third-quarter per share profit narrowly beat recently lowered estimates after softness in key markets, higher costs and unfavorable currency translations took their toll.

Peoria, Ill.-based Caterpillar, which warned analysts two weeks ago that it would not meet third-quarter profit forecasts at the time, said it earned $216 million, or 62 cents per share, on revenue of $4.78 billion in the latest quarter. That compares with $219 million, or 61 cents, on revenue of $4.72 billion in the year-ago period.

According to a First Call/Thomson Financial survey, the mean estimate was for a 58 cent profit per share. Analysts trimmed their estimates by 10 cents after the company issued its warning last month.

In addition to weakness in some of its key markets, Caterpillar said its performance also was undermined by unfavorable currency impact and costs related to selling, general and administrative, and research and development. The favorable impacts of a tax adjustment, improved price realization (excluding currency) and higher sales volume largely offset the unfavorable items.

In a statement, Caterpillar’s chairman and chief executive Glen Barton said, “In response to these conditions, we have redoubled efforts to reduce costs to ensure we deliver acceptable results for the full year.”

For 2000, analysts on average were forecasting a profit of $2.88 per share, up from $2.63 per share in 1999.

Barton added, “...Our geographic and product diversity is a major strength, and we continue to benefit from the unprecedented demand for electric power and energy development applications.”

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The Associated Press and Reuters contributed to this report.