Earnings Reports for Jan. 30

Amazon Announces Job Cuts, Narrower Q4 loss

Internet retail giant Amazon.com posted a reduced quarterly loss today, just beating Wall Street estimates, but said it would cut 15 percent of its workforce, 1,300 employees, and take a restructuring charge of more than $150 million.

Amazon, which sells everything from books to electronics to hardware at its online store, said it would cut 1,300 jobs, closing a distribution center in McDonough, Georgia, and its customer service center in Seattle. It also said it would operate its Seattle distribution center only seasonally.

The company statement gave no immediate reason for the restructuring, but analysts had expected the move because of continued losses by the company, which is under pressure from investors to turn a profit, and because of a disappointing holiday sales season.

For the three months ended Dec. 31, its pro forma net loss was $90.4 million, or 25 cents a share, compared with $184.9 million, or 55 cents, a year earlier. Wall Street analysts tracked by First Call/Thomson Financial had expected Amazon to lose 26 cents a share.

Amazon shares closed at $18-15/16, down $1-3/16, or 5.9 percent, on Nasdaq before the announcement.

Amazon said quarterly revenues of $972 million were up 44 percent from $676 million a year earlier. That was more than the company's recent forecast of $960 million.

Earlier this month, Amazon said it had slashed its year-end inventory balance by 20 percent to less than $175 million. Analysts have said the 5-year-old company is relatively inexperienced at stocking the right mix of goods.

Analysts viewed the holiday quarter as a crucial time for Amazon to prove its growth first, profits later strategy could work. The company has expanded beyond its core books business into music, software, hardware and even lawn furniture.


Higher Medical Costs Hurt Aetna

Aetna, the largest U.S. health insurer, said today fourth-quarter earnings from continuing operations fell 65 percent percent, as higher medical costs cut into profits.

Hartford, Conn.-based Aetna, which has about 19 million health-care members in the United States, said fourth-quarter earnings from continuing operations dropped to $28.7 million, or 20 cents a share, following the recent divestiture of its financial services and international segments. That compares with operating earnings of $81 million, or 55 cents a share, in the same period a year ago.

The latest quarter's results beat analysts' consensus forecast of 16 cents, according to First Call/Thomson Financial. First Call said the forecast excluded Aetna's financial services and international businesses, as well as securities gains and losses.

Aetna's medical loss ratio — a crucial industry measurement that compares medical costs such as paying doctors and hospitals against revenues — in its commercial health maintenance organization, or HMO, business rose to 87.2 percent in the quarter. The company's total revenues fell about one percent to $6.6 billion.

Aetna's stock has underperformed the Standard & Poor's Health Care Managed Care index by more than 55 percent in the past year.

Including charges totaling $381.9 million, the company posted a fourth-quarter operating loss of $353.2 million, or $2.49 per share. These charges relate to the write-off of goodwill mostly associated with Medicare market exits, restructuring plans announced in December and change-in-control costs related to the sale of its international and financial services businesses to Dutch financial services giant ING Groep NV last month.

With the sale, Aetna, one of the oldest U.S. insurers, became purely a health insurer. Its business now consists of health care, including dental, group insurance and related benefits, as well as a large case pensions unit.

Including discontinued operations, which comprise those businesses sold to ING, Aetna reported a net loss of $406.3 million, or $2.87 per common share, for the fourth quarter. This reflects a loss of $372.0 million, or $2.63 per common share, from continuing operations as a result of previously mentioned charges and the loss of $34.3 million from discontinued operations. The net loss compares with net income of $134.4 million, or 92 cents a common share, for the fourth quarter 1999.

Since the sale, Aetna has taken aggressive steps to tackle problems in its health insurance business, including plans to cut 5,000 jobs, or 13 percent of its work force.

Aetna, which has posted sluggish financial growth recently even as its managed care peers have enjoyed robust profits amid premium price increases, said the medical loss ratio in its Medicare HMO business was 97.5 percent in the quarter, significantly higher than in the prior-year period.

Aetna's total health membership stood at 19.3 million as of Dec. 31, a 6 percent decline during the year, the company said. Membership increased by 81,000 from the third quarter of 2000, but is expected to decrease overall in 2001 due to largely planned attrition at the company's Prudential Health Care business and Medicare HMO and commercial HMO product market exits. BACK TO TOP

Hershey Foods Posts Sweet Earnings On Strong Holiday Sales

Hershey Foods, the largest U.S. chocolate maker, said today its fourth-quarter earnings per share rose 20 percent, beating Wall Street's estimates, on increased sales.

The Hershey, Pa., maker of Hershey bars, Hershey Kisses and Reese's candies, said net income for the period rose to $116 million, or 84 cents per diluted share, from $98 million, or 70 cents a share, in the year-ago period.

Hershey, which has been expanding its product offerings with different sizes and flavors of old favorites, was expected to earn 82 cents a share, based on a recent poll of analysts by First Call/Thomson Financial.

Sales rose to $1.19 billion from $1.11 billion, boosted by strong sales around the Halloween and Christmas holidays.

The stock has outperformed the Standard & Poor's 500 Index by nearly 50 percent in the past 12 months. BACK TO TOP

Procter & Gamble's Core Profit Rises

Household products maker Procter & Gamble said today second-quarter profit rose 4 percent before unusual charges, beating Wall Street forecasts, as price increases, tax gains and the divestiture of its Clearasil business offset higher raw material costs.

The Cincinnati, Ohio-based maker of Tide laundry detergent, Crest toothpaste and a host of other products also said it was comfortable with the high end of analysts' earnings estimates for the full fiscal year.

"I think the stock should do fairly well because obviously folks were concerned that they (P&G) were going to guide down [earnings estimates] for the back half of the year and maybe even miss this quarter," said Jim Gingrich, consumer products analyst at Sanford Bernstein.

P&G said earnings for the second quarter, ended Dec. 31, were $1.31 billion, or 93 cents per diluted share, up from $1.26 billion, or 88 cents a share, a year earlier. The results for both years exclude restructuring charges.

Analysts on average had expected the company to earn 92 cents a share, according to First Call/Thomson Financial, which tracks such estimates.

"We delivered the earnings per share results we said we would — for the second quarter in a row," P&G Chief Executive Officer Alan Lafley said. Lafley succeeded Durk Jager as chief executive last June, after the company's stock was rocked by a series of missed profit forecasts. "Still, we can and must do better. Our goal is to get back to consistent annual double-digit earnings per share growth."

Second-quarter revenue fell 4 percent, to $10.18 billion from $10.59 billion a year earlier, as the weak euro cut into sales. Unit volume fell 2 percent compared with record levels a year ago.

P&G said it expects third-quarter earnings of 72 to 74 cents a share before unusual items. Analysts' consensus forecast is 73 cents, according to First Call. In the year-ago third quarter P&G earned 64 cents a share.

Unit volume is expected to be flat to down 2 percent in the third quarter, with sales up in the low single digits, excluding the impact of foreign exchange, P&G said.

Analysts have forecast core earnings per share for P&G of $3.10 to $3.17 for the full fiscal year, up from $2.95 in the previous year. The company reiterated that it was comfortable with the high end of this range of estimates.

Based on current trends and expectations, the company said it now expects unit volume to be about flat for the year, and sales, excluding foreign exchange effects, to be up 2 to 4 percent.

In the past year the stock, a component of the Dow Jones industrial average, has underperformed that index by about 30 percent.

In recent months P&G has raised prices on its products to try to cope with rising costs. Most of those price boosts have been matched by competitors, but in some instances the increases were not matched, causing P&G to lose market share. BACK TO TOP

UPS Cuts 2001 Outlook, Misses Expectations

United Parcel Service, the world's No. 1 package delivery company, reported today a profit slightly above lowered Wall Street expectations and cut its earnings forecast for 2001 because of a slowing economy.

Atlanta-based UPS, which reported last month the slowing U.S. economy was cutting into its domestic package delivery volumes, said it expected earnings per share to grow 9 percent to 11 percent this year, down from a previous estimate in the "mid-teens."

The company also said revenue growth would likely fall within a range of 8 percent to 10 percent this year. Last month, it said it expected to post revenue growth of 10 percent barring further slowing in the economy.

"Our rate of growth this year will not be at the same pace as we've seen in the last few years domestically," UPS Chief Financial Officer Scott Davis said in a statement accompanying fourth-quarter financial results. "But we do expect to grow, and at a rate faster than the domestic package market."

For the three months ended Dec. 31, UPS earned $724 million, or 63 cents a share, compared to $661 million, or 56 cents a share, in the year-earlier period.

Analysts on average expected UPS to earn 61 cents, according to research firm First Call/Thomson Financial, which tracks consensus data.

That estimate was lowered from 64 cents last month after UPS announced that a slowdown in the U.S. economy appeared to be cutting into its holiday package volumes.

UPS' global volume — a key measure of financial health in the package delivery industry — averaged 14.7 million pieces a day in the quarter, up 3.6 percent from the same period last year.

UPS averaged volume of about 1.3 million pieces a day for its entire international service, a 13.3 percent gain from last year. Volumes for the company's U.S. domestic package business averaged about 13.5 million pieces a day, a 2.8 percent rise over the year-earlier period.

UPS, which was recently awarded a new China route, said it "remained bullish" on its international markets. BACK TO TOP

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


Pfizer's Profits Rise on Strong Viagra Sales

Pfizer, the No. 1 U.S. drugmaker, reported today a 20 percent gain in fourth-quarter operating earnings, meeting Wall Street expectations, helped by sales of its blockbuster anti-cholesterol drug, Lipitor, and arthritis treatment Celebrex.

The New York-based company, also known for its anti-impotence pill Viagra, reported earnings of $1.76 billion, or 27 cents per diluted share, excluding the impact of special items and merger-related costs. In the same year-ago period, the company earned $1.47 billion, or 23 cents per share.

Analysts, on average, had estimated the drugmaker, which acquired New Jersey drug maker Warner-Lambert Co. last year along with Warner-Lambert's crown jewel, Lipitor, would earn 27 cents a share.

After special items and merger related costs, quarterly net income fell 3 percent to $1.42 billion compared with $1.27 billion in the year ago period. Earnings per share after items remained flat at 23 cents.

"With remarkable speed and focus, we have rapidly integrated the industry's two fastest-growing companies while more than doubling our initially forecasted year-2000 merger savings to about $430 million," said Chairman William Steere Jr.

Looking at 2001, Pfizer forecast earnings per share of $1.27 or better, excluding items, and said it plans to spend $5 billion on research and development. Pfizer said it sees 25 percent earnings growth through 2002, and double-digit recorded revenue growth in 2001.

The company said fourth-quarter revenues with special items rose 8 percent to $8.1 billion compared with $7.5 billion a year ago. Reported global sales of prescription drugs in the United States rose 19 percent to $4.2 billion, excluding the impact of foreign exchange and the company's withdrawal last year of diabetes drug Rezulin following safety concerns.

Outside the U.S., pharmaceutical sales jumped 20 percent to $2.3 billion in the quarter on the same basis.

Shares of Pfizer have flourished in 2000 along with those of the rest of the pharmaceutical industry, as investors took money out of slumping technology stocks in favor of defensive areas like the drugs sector — an area seen as safe haven because the economy does not affect how many pills people take.

The stock has outperformed its peers on the American Stock Exchange Pharmaceutical Index by nearly 5 percent over the last 52 weeks, and out-paced the benchmark Standard & Poor's 500 index by about 20 percent over that period.

Pfizer said its so-called "alliance" revenues from combined sales of two drugs it co-markets with other companies — Pharmacia Corp.'s Celebrex and Eisai Inc.'s Alzheimer's disease treatment Aricept — soared 63 percent to $348 million in the quarter.

Global sales of Lipitor jumped 26 percent to $1.43 billion and grew 33 percent in the year to $5 billion — reaching the company's previously stated goal.

Global Viagra sales in the period rose 37 percent to $380 million in the fourth quarter.

Regarding its acquisition of Warner-Lambert, Pfizer said it achieved $430 million in savings in 2000 and sees merger savings in 2001 of $1.2 billion, growing to at least $1.6 billion in 2002. BACK TO TOP

International Paper's Earnings Fall 36 Percent

International Paper, the world's largest paper and forest products company, said today its fourth-quarter earnings fell 36 percent due to rising energy costs and the slowing U.S. economy.

The company said net earnings for the quarter, before special items, were $145 million, or 28 cents per share, compared with $227 million, or 55 cents per share in the 1999 quarter.

After special items, including pre-tax, one-time charges for Union Camp and Champion merger-related costs, IP posted a loss of 85 cents for the fourth quarter.

After IP warned a month ago of an earnings shortfall, the average consensus of analysts polled by First Call/Thomson Financial was lowered from 44 cents to 30 cents per share.

Fourth-quarter net sales were $7.2 billion, compared with $6.3 billion for the same period in 1999.

John Dillon, chairman and chief executive officer, said the slowing economy and rising energy costs occurred when the weather turns colder and demand drops for lumber and other wood products.

"As demand fell, we maintained our commitment to keep our production in line with customer orders, which negatively impacted overall sales," he said. "While many of these factors are continuing into the opening months of 2001, the steps we are taking will lead to a stronger International Paper for the long term."

International Paper said it has nearly completed its previously announced plan to adjust capacity as the wood products industry continues to battle lower demand and higher energy costs.

The company has closed its Mobile, Ala. and Camden, Ark. mills, and completed the downsizing of the Courtland, Ala. mill. The closure of the Lockhaven, Pa. mill is proceeding on schedule, IP said.

It also said asset sales are progressing rapidly as International Paper focuses on its three core businesses — paper, packaging and forest products. The company has increased its asset sales target to $5 billion, including timberlands, to be completed by the end of 2001.

It said it aims to reduce capital spending to $1.2 billion in the year 2001, which is about 60 percent of depreciation and amortization. The capital expenditure program in 2001 is 20 percent below the $1.4 billion spent in the year 2000, it said.

International Paper makes paper, packaging and wood and building products, as well as being the largest private forest landowner in the world. It has operations in nearly 50 countries, employs more than 117,000 people and exports its products to more than 130 nations. BACK TO TOP

Mad Cow Takes a Bite out of McDonald's

Fast food giant McDonald's said today its fourth-quarter earnings fell 7 percent as an outbreak of mad cow disease in Europe pushed the region's sales down 10 percent and threatened to weaken the company's first quarter results.

Net income at the Oak Brook, Ill.-based hamburger maker, the largest restaurant company in the world, fell to $452 million, or 34 cents a share, from $486.2 million, or 35 cents a share, a year earlier. McDonald's was expected to earn 35 cents a share, according to a recent poll of analysts by First Call/Thomson Financial.

McDonald's, which operates nearly 5,500 restaurants in Europe, its second-largest market behind the United States, has since November seen sales erode amid an outbreak of mad cow disease, or bovine spongiform encephalopathy, on the continent.

BSE is a chronic degenerative disease affecting the central nervous system of cattle and is believed to be contracted through feed containing animal by-products. It has been linked to a similar brain-wasting disease in humans.

CEO Jack Greenberg said in a statement that he expects a difficult first quarter of 2001 due to continued mad cow concerns, tough comparisons from last year, and an extra trading day in 2000.

"We expect the first quarter to be very challenging, due to outstanding results and an extra trading day in 2000, and continuing consumer confidence issues about European beef," he said.

The company has been battling public fears with stepped up advertising and greater promotion of non-beef products.

Sales to Europe, the company's second-largest market behind the U.S., fell 10 percent in the quarter to $2.21 billion from $2.45 billion one year ago. Operating income fell 17 percent to $267.3 million from $322.2 million.

"Europe got hit pretty hard," said Bear Stearns analyst Joe Buckley, who in June lowered his rating on McDonald's shares to neutral due to broader international concerns, including fluctuations in the euro. "The problem with mad cow is that it is an unknown. No one knows how long these concerns last."

Systemwide sales, which include sales from restaurants owned by franchises and those owned by the company, rose to $9.92 billion from $9.75 billion a year ago.

Sales in the United States, McDonald's largest market, rose 3 percent to $4.82 billion, from $4.68 billion one year ago. Operating income rose 14 percent to $385.3 million from $338.9 million. Sales in Asia Pacific, McDonald's third-largest market, rose 3 percent to $1.75 billion from $1.70 billion a year ago.

"Despite a number of operating challenges, our worldwide comparable sales were positive and systemwide sales increased seven percent in constant currencies for the year," Greenberg said.

The company plans to add about 1,700 restaurants in 2001, he said. The company said that 2001 per share earnings were expected to grow between 10 percent to 13 percent, excluding the impact of foreign currency translation.

In the year, it plans to buy back about $1.2 billion in stock, the remainder of a three-year $4.5 billion plan. In 2000, it purchased $2.0 billion worth. BACK TO TOP

Qwest Tops Wall Street

Telephone and data services provider Qwest Communications today posted a better-than-expected 44 percent jump in fourth-quarter profits, propelled by robust growth in Internet, data and wireless telephone revenues.

Qwest, which acquired regional phone company U S West Inc. last year in a $36 billion deal, said in a statement it was on track to meet its targets for 2001 revenues and earnings before interest, taxes, depreciation and amortization, or EBITDA, a key measure of a company's performance.

Andrew Hamerling, an analyst with Banc of America, called the results "terrific."

"Everything is as expected," he said. "Overall I'd say it's a great quarter."

The Denver-based company said pro forma profits excluding one-time items rose to $270 million, or 16 cents a diluted share, compared with $188 million, or 11 cents a share, a year ago.

The results beat Wall Street expectations of 14 cents a share, according to research firm First Call/Thomson Financial.

"With the initial integration of the [U S West] merger successfully completed, we are on track to meet our expected growth rates," Chairman and Chief Executive Joseph Nacchio said in a statement.

Qwest said revenues rose 9.9 percent to $5.02 billion. The increase was driven by growth of almost 40 percent in Internet and data services.

Wireless revenues rose 90 percent to almost $150 million. The number of wireless customers increased to more than 805,000, above the company's target of 800,000 for the end of 2000.

Fourth-quarter EBITDA was up 19.7 percent, to $1.99 billion.

Shares of Qwest have fallen about 10 percent amid sharp declines throughout the telecom sector over the past year. Its stock has underperformed the Standard & Poor's 500 index by about 4 percent.

The company also said it expected to double the number of customers for its digital subscriber line (DSL) service, which provides high-speed Internet access over conventional phone lines, to 500,000 by the end of the year.

Qwest said it ended 2000 with more than 255,000 DSL customers, above its target of 250,000.

It also said it expected to file with the Federal Communications Commission to enter long-distance service in several states by the end of 2001.

It expects to apply to reenter long-distance business in one of the states in its local service area by the summer.

Tavis McCourt, an analyst with Morgan Keegan & Co. Inc. in Memphis, Tenn., said entry into long-distance markets was vital for Qwest's growth.

"Certainly they are going to be as aggressive as possible to make that a reality," he said.

Qwest reiterated that it expected 2001 revenues to be in the range of $21.3 billion to $21.7 billion and EBITDA to be $8.5 billion to $8.7 billion.

Hamerling, the Banc of America analyst, said the biggest challenge facing Qwest was to meet its target of 20 percent long-term EBITDA growth.


Whirlpool Reiterates Job Cuts

Appliance maker Whirlpool met Wall Street's lowered fourth-quarter earnings expectations and affirmed its global restructuring plan will mean up to 6,000 jobs cut in the coming year.

The company said today it expects to trim more than 2,000 jobs worldwide as part of the restructuring's first phase, with more details to be announced within two weeks.

All told, the company shake-up — which will pare 10 percent of Whirlpool's 60,000-member work force — will result in pre-tax charges of $300 million to $350 million, with annualized savings of $225 million to $250 million, the company said.

"This will be a year of challenge and opportunity," David R. Whitwam, Whirlpool's chairman and chief executive, said in a statement. "We believe that our strong brands, global platform, innovative products and consumer focus — combined with our restructuring efforts and the associated lower cost structure — will produce a strong operational performance and solid financial results in 2001."

Whirlpool said its fourth-quarter net earnings were $67 million, or $1 per share, compared with $113 million, or $1.51 per share, during the year-ago period.

Analysts surveyed by First Call/Thomson Financial were expecting 99 cents per share, having lowered their estimate from $1.42 a share after Whirlpool issued an earnings warning last month. At the time, Whirlpool blamed intensified price competition, rising material costs, and slowing or declining demand.

The company said sales during the three months ended Dec. 31 were $2.58 billion, down 4 percent from $2.69 billion in the year-ago period.

It added that it expects its first-quarter performance, excluding charges, to be in line with fourth-quarter earnings of $1 per share. Analysts surveyed by First Call/Thomson Financial had been expecting $1.02 per share.

The North American appliance industry has been expected to be down 7 percent to 8 percent in the fourth quarter versus the same period in 1999, Whirlpool said last month. Earlier company estimates forecast a fourth-quarter decline in industry shipments of 2 percent to 3 percent.

Whirlpool has said its restructuring involves a reduction and reconfiguration of global operations, including the closure of some plants.

For the year, Whirlpool earned $367 million, or $5.20 per share, on sales of $10.33 billion. In the previous year, the company earned $347 million, or $4.56 per share, on sales of $10.51 billion.

Whirlpool is the world's largest manufacturer and marketer of major home appliances. It sells products under 11 brand names in more than 170 countries. The Benton Harbor-based company has major operations in seven states — Arkansas, Indiana, Michigan, Mississippi, Ohio, Oklahoma and Tennessee — and 12 countries, including Canada and Mexico.