Earnings Reports for Oct. 23

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.

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