Earnings Reports for Oct. 18

AOL Surpasses Analyst Estimates

America Online Inc., the world’s largest Internet services provider, said fiscal first quarter earnings doubled from a year earlier as subscriber, advertising and e-commerce revenues drove growth.

Dulles, Va.-based AOL said earnings, excluding items, rose to $340 million, or 14 cents a share, compared to $182 million, or 7 cents a share, in the same period last year.

Revenue climbed 34 percent to $2 billion, up from $1.5 billion a year earlier. Advertising and e-commerce revenue rose 80 percent to $649 million, within analysts’ estimates. The company added 1.4 million net new subscribers in the quarter, for a total of 24.6 million members worldwide.

Wall Street analysts had expected AOL to earn 13 cents a share, according to First Call/Thomson Financial.

AOL’s merger with media giant Time Warner Inc. is still awaiting U.S. regulatory approval.

Net income rose to $345 million, or 13 cents a diluted share, from $181 million, or 7 cents a diluted share the year-earlier period.

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Apple Disappoints Wall Street

Apple Computer Inc. reported earnings that fell slightly short of the analyst forecasts, which had been reduced last month after the company warned of a sales shortfall.

Apple said it earned $108 million or 30 cents per diluted share in the quarter, excluding certain unusual gains.

Most analysts had been forecasting fourth quarter earnings of 31 cents per share, according to First Call/Thomson Financial, which surveys results.

Including all the unusual items, Apple had a net profit of $170 million or 47 cents per diluted share, compared with $111 million or 31 cents per diluted share in the year-ago quarter.

Apple said revenues rose to $1.87 billion, up 40 percent from the year-ago quarter. Analysts had been forecasting revenues of $1.87 billion.

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Avon Narrowly Beats Street

Avon Products Inc., the direct seller of beauty products, reported a 5 percent rise in third-quarter earnings, narrowly beating Wall Street projections despite weakness in Europe. Avon also said it will be able to achieve earnings per share increases in the range of low -to mid-teens for the year.

The company reported earnings of $93 million, or 39 cents a share, in the three months, ended Sept. 30, up from $88.2 million, or 34 cents per share, in 1999.

Revenues during the quarter increased 7 percent to $1.34 billion from $1.25 billion in the year-ago period.

The results beat Wall Street earnings expectations of 38 cents.

Avon said that sales and profit gains in the U.S., Latin America and in the Asia-Pacific region more than offset a 3 percent sales decline in Europe due to currency weakness.

Avon’s U.S. operations posted a 5 percent sales increase, but stepped up spending on advertising, its e-commerce site and other brand-building initiatives. Total beauty sales were up 9 percent, fueled by the successful launch of Retroactive, a skin care product under the Anew brand. Avon expects Anew to be the best-selling skin care product in the company’s history.

Andrea Jung, Avon’s chief executive, said the company’s launch of a new Internet Web site for its sales representatives, and the development of a new beauty brand called Becoming to be sold at retail starting mid-2001, should represent “significant growth vectors over the long term.”

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Boeing Soars Above Expectations

Boeing said today operating earnings rose 27 percent in the third quarter, beating Wall Street forecasts, as the aerospace giant squeezed more cash out of its businesses even as revenues shrank.

The world’s biggest plane-maker said it earned $650 million, or 74 cents per share, excluding extraordinary items, in the three months ended Sept. 30. In the year-earlier period Boeing earned $512 million, or 55 cents, excluding extraordinary items.

Revenues at the Seattle company fell to $11.88 billion from $13.28 billion.

Analysts on average had expected a strong quarter from Boeing amid a string of recent positive news on commercial jet orders and rising cash flow expectations. The consensus earnings forecast among analysts surveyed by First Call/Thomson Financial was 67 cents per share.

Boeing also forecast 2001 revenues would reach $57 billion, an increase from the recent 2000 projection of $51 billion but still below the $58 billion revenues of 1999.

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Profits Slump at Chase Manhattan

Chase Manhattan Corp., said profits slumped 26 percent in the third quarter, sharply below Wall Street estimates, after losses on investments, sluggish trading revenues and higher costs.

The New York-based bank, which recently announced plans to buy rival J.P. Morgan & Co., earned $884 million, or 66 cents per diluted share, in the third quarter, down from $1.19 billion, or 92 cents a share, in the year-ago period. The figures for the latest quarter include special items. Without these items, earnings were $905 million, or 68 cents a share.

Chase’s earnings were far below Wall Street’s consensus forecast of 93 cents a share as compiled by First Call/Thomson Financial, which tracks analysts’ estimates.

A steep drop in the value of Chase’s investments in start-up companies at its Capital Partners arm, which have bolstered prior quarterly results, hurt the bank’s results in the third-quarter.

Chase increasingly has looked to securities-type businesses, such as investing and advising on mergers, for profits, rather than to the traditional lending businesses.

Its trading revenues and corporate finance fees were down from the second quarter amid lower market volatility and trading volumes as well as a slowdown in leveraged finance.

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EMC Profits Rise 55 Percent

EMC Corp., the No. 1 data-storage company, said third-quarter earnings rose 55 percent, beating estimates, but a components shortage caused its high-margin software sales to decline from the previous quarter.

EMC said it earned $458.2 million, or 20 cents a diluted share, compared with $295.8 million, or 13 cents a share, in the year-ago period. Total third-quarter revenues rose 34 percent to $2.28 billion, compared with $1.7 billion in the year-ago period. EMC said its fastest growing market was the Asia Pacific region, where storage revenue grew 130 percent in the third quarter.

In the vital storage sector, total storage revenue in the quarter increased 47 percent to $2.14 billion, the highest rate of growth for EMC in more than five years, the company said.

Analysts surveyed by First Call/Thomson Financial were looking, on average, for EMC to earn 19 cents a share. EMC President Joe Tucci said the components shortage prevented the company from meeting customer demand for some of its high-end storage devices that are sold with company software. He said the problem has since been fixed.

“We could not ship all the big boxes that we had demand for,” Tucci said. “We tweaked our sales force to go after more upgrades. … In doing that, we don’t sell much software with upgrades.”

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Ford Falls on Recall

Ford Motors’ third-quarter earnings declined 7 percent to $888 million, a drop the company blamed on costs from the recall of 6.5 million Firestone tires, many of which were on its Ford Explorers.

“Getting our customers onto good tires has been, and continues to be, more important than short-term profits,” Ford president and CEO Jacques Nasser said in a statement. “This was a difficult quarter for our customers, our employees, our dealers and our shareholders and we are committed to quickly completing the Firestone tire recall.”

Ford did not give an estimate for the cost of the recall. Nasser said during an interview with 60 Minutes earlier this month that the recall would cost in the “neighborhood” of $500 million.

The world’s No. 2 automaker earned 53 cents a share for the three months ending in September, compared with $989 million, or 78 cents a share for the same period of 1999. Last year’s results do not include earnings from Visteon Corp., the parts arm Ford spun off this year.

The results met Wall Street expectations after adjusting for a complicated stock swap that changed the number of shares in the company during the quarter. Wall Street analysts had expected earnings of 50 cents a share, according to a survey by First Call/Thomson Financial.

Earnings in Ford’s automotive operations totaled $391 million, a drop of 27 percent from $535 million over last year.

North American automotive earnings were down 11 percent, from $880 million to $769 million, despite a 4 percent increase in revenues. While vehicle sales were up 5 percent, so were U.S. incentives, such as rebates and low-interest rate loans.

The costs to Ford for the tire recall include the temporary shutdown of three factories to divert tires to consumers, which cut production of the Ford Explorer and Mercury Mountaineer by 15,000 vehicles. Ford has also said it would share some costs of the recall with Bridgestone/Firestone Inc.

The picture was no better overseas, where Ford’s losses increased 38 percent, to $285 million, excluding one-time charges. Losses in Europe increased 42 percent, from $156 million to $221 million, while losses in South America decreased 25 percent, from $86 million last year to $64 million this year. Ford broke even in Asia and the rest of the world, compared to a $35 million profit last year.

Ford Credit earned $386 million in the third quarter, up 22 percent from a year ago. Rental car company Hertz Corp. earned $143 million in the quarter, up 3 percent over last year; Ford’s share of Hertz’s earnings was $116 million.

Total revenues were up 7 percent, from $37.2 billion to $40 billion.

For the first nine months of 2000 Ford earned $4.3 billion, down 9.5 percent from a year ago, excluding Visteon.

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International Paper to Close Plants

International Paper Co. reported that earnings for the third quarter rose to $260 million, or 53 cents per share before special items, compared with $193 million, or 46 cents, before special items, a year earlier. Analysts on average had expected profit of 52 cents a share in the quarter, according to First Call/Thomson Financial, which tracks consensus forecasts. Net sales climbed to $7.8 billion from $6.3 billion in 1999.

The Purchase, N.Y., company also said it plans to cut up to 2,500 jobs, or about 2 percent of its work force, and close mills in three states as part of a restructuring designed to streamline operations.

The world’s largest paper and forest products company, which employs more than 117,000 people, said it is shutting mills in Mobile, Ala.; Lock Haven, Penn., and Camden, Ark. The company also said it was planning to idle some machines at its Courtland, Ala. facility.

“International Paper’s merger and acquisition activities over the past five years have given us the flexibility and low-cost capacity that allows us to realign production more efficiently and reduce our higher-cost operations,” said chairman and chief executive John Dillon.

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J.P. Morgan’s Profits Rise 16 Percent

J.P. Morgan, the blue-blood New York bank being bought by Chase Manhattan, said today its third-quarter profits rose 16 percent, driven by trading gains.

The No. 5 U.S. bank holding company, which has transformed itself from a commercial into an investment bank, earned $514 million or $2.77 a diluted share in the third quarter, compared with $442 million, or $2.22 a share, a year before.

Wall Street had expected the bank to earn $2.63 a share, according to First Call/Thomson Financial, which tracks analysts’ profit forecasts.

Equities trading revenues grew 78 percent to $448 million, driven by gains from trading equities derivatives. Investment banking revenues rose $60 million from a year earlier to $426 million. Asset management services revenues in the quarter rose 11 percent from a year before to $390 million. But credit market revenues fell 19 percent to $346 million.

Chase, the country’s third-biggest bank holding company, said last month it would buy J.P. Morgan for about $34 billion in stock, in a bid to join the small number of powerful global players. BACK TO TOP

Microsoft Breezes Past Estimates

Microsoft Corp. posted a quarterly profit that soundly beat Wall Street estimates before including an accounting change, saying performance was solid across all its businesses and that it was bullish about its key product, Windows 2000.

Microsoft, which makes the Windows operating system that runs most personal computers, said its net profit in its first quarter ended Sept. 30 rose to $2.58 billion, or 46 cents a share, from $2.19 billion, or 40 cents a share, a year earlier. Including a change in how it must account for some hedging activities, the profit was 40 cents a share.

The Redmond, Wash.-based company was expected to show a profit of 41 cents a share, according to estimates compiled by First Call/Thomson Financial.

The higher-than expected profit was surprising since most analysts had expected the company to at best top estimates by a penny. Microsoft stock has been battered by concerns over a slowing PC market and lackluster sales while it waits for key new products to gain momentum.

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Nabisco Holdings Beats Street

Nabisco Holdings Corp., the nation’s biggest cookie and cracker maker, said strong sales boosted third-quarter operating earnings by 33 percent, easily beating the average analyst forecast.

The maker of Oreo cookies, Lifesaver candies and Ritz crackers reported operating earnings of $108 million, or 40 cents per share, in the quarter ended Sept. 30, up from $81 million, or 30 cents a share, in the same period a year ago.

Analysts on average had expected earnings of 35 cents a share, according to market researchers First Call/Thomson Financial.

Figures for the latest quarter exclude expenses of 11 cents per share related to the pending sale of Nabisco.

Nabisco Holdings’ parent, Nabisco Group Holdings Corp., agreed in June to sell the food company to Philip Morris Cos., which wants to create a snack and food behemoth by combining Nabisco with its Kraft Foods unit.

Nabisco Group Holdings will be sold to R.J. Reynolds Tobacco Holdings Inc.

“We move into the fourth quarter with considerable momentum,” Nabisco President and Chief Executive James Kilts said in a statement.

Nabisco’s sale to Philip Morris is expected to close during the fourth quarter, following shareholder approval and regulatory review, the company said.

International sales for the quarter were $537 million, up 4 percent, excluding Nabisco’s European businesses, which were transferred during the current-year quarter to a new venture with United Biscuits Plc.

For Nabisco Group Holdings, third-quarter net income rose to $82 million, or 25 cents a diluted share, from $63 million, or 19 cents a diluted share, in the year-ago period.

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Sabre Rises Above Estimates

Sabre Holdings, a travel marketing and distribution firm, said on today that third-quarter earnings excluding one-time charges rose 2.1 percent, just beating estimates, and revenues grew about 8 percent.

Fort Worth-based Sabre, which owns a 62 percent stake in online travel services firm Travelocity.com Inc., posted net earnings before special items of $73 million or 57 cents per share after $72 million or 55 cents a year earlier.

On average, analysts had expected the company to earn 56 cents a share in the quarter, according to First Call/Thomson Financial. Sabre shares closed on Tuesday at $29-9/16, at the lower end of a 52-week range between $22-5/16 and $56.

Sabre said third-quarter revenues were $667 million, up 8.1 from $617 million a year earlier. “The company expects to return to double-digit revenue growth in the fourth quarter, primarily driven by an anticipated continuation of travel bookings growth and online travel growth,” it said in a statement.

Sabre said that after special items, mainly related to investments in Travelocity.com, Sabre Business Travel Solutions and Sabre Virtually There, net earnings for the quarter were $44 million or 34 cents per share, down 43.4 percent from $78 million or 55 cents in the third quarter 1999.

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Sun Microsystems Posts Solid Profits

First-quarter net income at Sun Microsystems rose 88 percent, easily topping Wall Street expectations, as it continued to benefit from a scramble for equipment to manage and store Web traffic. Net income for the three months ended Sept. 26 rose to $510 million, or 30 cents a share, from $271 million, or a split-adjusted 16 cents, the comparable period a year ago.

Excluding acquisition-related costs, Sun earned $276 million, or 18 cents per share in the year-ago period.

The company had been expected to earn 26 cents a share this quarter, according to a survey of analysts by First Call/Thomson Financial.

“We continue to post the kind of numbers that reflect our ongoing share gains in the market place,” company chief executive Scott McNealy said in a statement. “We’re picking up right where we left off last year.”

Revenue soared 60 percent to $5.05 billion from $3.15 billion as customers snapped up high-end computers and data-storage equipment for managing Internet commerce and serving up Web pages.

The company competes mainly with Hewlett-Packard Co. and IBM Corp. Sun executives predicted they would gain more market share after it revamps its product lines in the next year.

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Texas Instruments Meets Estimates

Texas Instruments Inc, the world’s largest maker of computer chips for mobile phones, said third-quarter net income rose 31 percent, meeting expectations, on broad demand for its chips for wireless and Internet communications devices. The company also confirmed reports from other suppliers that worldwide demand for wireless phones appeared to be weakening. Texas Instruments added that it expects lower revenues from its wireless chips as handset makers work through existing inventories. But the company said higher sales of other semiconductor types would yield overall fourth-quarter revenues “about even” with third-quarter revenues.

The Dallas-based manufacturer of the chips used in about two-thirds of the world’s digital cellular phones said pro-forma net income climbed to $591 million, or a diluted 33 cents a share, from $453 million, or 26 cents a share a year ago. The performance matched Wall Street expectations for the company.

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Publishing Unit Lifts Time Warner

Media giant Time Warner said today its third-quarter operating earnings grew 13 percent, beating Wall Street estimates, helped by strong earnings from its publishing unit amid advertising growth.

The No. 2 U.S. cable provider and media company, whose merger with America Online Inc. is awaiting U.S. regulatory approval, said earnings before interest, taxes and amortization (EBITA), adjusted for unusual items, rose to $1.273 billion, or 7 cents a share, from $1.128 billion, or 7 cents share, in the year-earlier period.

Wall Street analysts had expected the company to post earnings before items of 4 cents a share this quarter, according to First Call/Thomson Financial.

The operator of HBO, CNN, TBS and Warner Brothers said on a a reported basis, including items, third-quarter net income fell to $1.276 billion, or 6 cents per diluted share in 2000, from $1.611 billion, or 28 cents per share during the year-ago period. Total revenues grew to $6.873 billion from $6.723 billion.

Revenues from its cable networks group , which some analysts had expected to be a weak, grew to $1.56 billion. Revenues from its publishing group fell to $1.08 billion from adjusted year-ago results. But EBITA for the group climbed to $494 million from $434 million, driven by ad gains at publications including Fortune and Time.

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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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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.