Earnings Reports for Jan. 24

— -- Lucent to Cut 10,000 Jobs

Lucent Technologies posted today a first-quarter loss and said it would cut10,000 jobs, or 10 percent of its work force, as part of a planto reduce expenses by $2 billion and recover from recent profitshortfalls and product development missteps.

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

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

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

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

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

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

The job cuts, which were widely expected, will primarilyreduce duplicated marketing, sales and administrative jobs,Lucent said, adding that it will continue to hire workers inhigh growth areas of its business. The company has about106,500 workers, excluding 16,500 workers from its AgereSystems microelectronics unit, which will be spun off.

As part of the restructuring, Lucent said it will reducecapital spending by $400 million by the end of the fiscal year.It also will significantly expand its previously announcedplans to use contract manufacturers, which will result in about6,000 fewer positions by the end of the fiscal year.

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

Chevron Smashes Expectations

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

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

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

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

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

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

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

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

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

In the fourth quarter Chevron benefited from improvedreliability of its U.S. West Coast refineries and strongermargins for jet fuel, diesel fuel and motor gasoline.

Outside the United States, results of Chevron's refiningand marketing joint venture with Texaco, Caltex, remaineddepressed as tough competition in the Asia-Pacific areadampened marketing margins.

Chevron's earnings excluding special items for the whole of2000 rose to $5.44 billion from $2.29 billion in 1999.

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

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

High Oil Prices Fuel Success at Texaco

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

White Plains, N.Y.-based Texaco, which is being acquired byChevron, said fourth-quarter income before special itemsrose to $840 million, or $1.55 per share, from $370 million, or67 cents a share, in the same period a year ago.

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

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

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

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

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

Before special items, its refining and marketing businessalso posted better results, helped by stronger profit marginson fuels such as gasoline and heating oil.

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

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

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

If the Chevron deal is completed, the combination will bethe world's fourth-largest publicly traded oil company, thelatest in a string of oil companies created throughconsolidation. Others include Exxon Mobil Corp. and BP AmocoPlc.

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

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

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

Exxon Mobil's Profits Surge

Fourth quarter net income at Exxon Mobilmore than doubled, helped by surging oil prices, as the companyeasily surpassed Wall Street's expectations.

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

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

Those figures include one-time gains and the effects of Exxon's$85 billion acquisition of Mobil, which was completed in December1999. The company took a $215 million charge for merger-relatedexpenses but also a gain of $315 million from asset sales, whichregulators required as a condition of approving the giant merger.

Revenue was $64.13 billion, up from $54.58 billion a yearearlier.

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

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

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

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

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

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Materials Cost and Strong Dollar Hurt DuPont

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

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

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

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

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

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

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

"Our employees worldwide have done a tremendous job counteringsome of the worst conditions in our industry in a decade," saidCharles O. Holliday Jr., DuPont chairman and chief executive. "Sixsegments had higher revenue and five improved earnings versus lastyear, a very solid performance."

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

A strong overseas dollar also hurt the company's profits, withthe weak euro reducing quarterly earnings by 5 cents a share and by15 cents a share for the year, the company said.

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

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Pfizer's Profits Rise on Strong Viagra Sales

Pfizer, the No. 1 U.S.drugmaker, reported today a 20 percent gain infourth-quarter operating earnings, meeting Wall Streetexpectations, helped by sales of its blockbusteranti-cholesterol drug, Lipitor, and arthritis treatmentCelebrex.

The New York-based company, also known for itsanti-impotence pill Viagra, reported earnings of $1.76 billion,or 27 cents per diluted share, excluding the impact of specialitems 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, whichacquired New Jersey drug maker Warner-Lambert Co. last yearalong with Warner-Lambert's crown jewel, Lipitor, would earn 27cents a share.

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

"With remarkable speed and focus, we have rapidlyintegrated the industry's two fastest-growing companies whilemore than doubling our initially forecasted year-2000 mergersavings to about $430 million," said Chairman William SteereJr.

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

The company said fourth-quarter revenues with special itemsrose 8 percent to $8.1 billion compared with $7.5 billion ayear ago. Reported global sales of prescription drugs in theUnited States rose 19 percent to $4.2 billion, excluding theimpact of foreign exchange and the company's withdrawal lastyear 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 thoseof the rest of the pharmaceutical industry, as investors tookmoney out of slumping technology stocks in favor of defensiveareas like the drugs sector — an area seen as safe havenbecause the economy does not affect how many pills peopletake.

The stock has outperformed its peers on the American StockExchange Pharmaceutical Index by nearly 5 percent over the last52 weeks, and out-paced the benchmark Standard & Poor's 500index by about 20 percent over that period.

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

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

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

Regarding its acquisition of Warner-Lambert, Pfizer said itachieved $430 million in savings in 2000 and sees mergersavings in 2001 of $1.2 billion, growing to at least $1.6billion 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 percentdue to rising energy costs and the slowing U.S. economy.

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

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

After IP warned a month ago of an earnings shortfall, theaverage consensus of analysts polled by First Call/ThomsonFinancial 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 theslowing economy and rising energy costs occurred when theweather turns colder and demand drops for lumber and other woodproducts.

"As demand fell, we maintained our commitment to keep ourproduction in line with customer orders, which negativelyimpacted overall sales," he said. "While many of these factorsare continuing into the opening months of 2001, the steps weare taking will lead to a stronger International Paper for thelong term."

International Paper said it has nearly completed itspreviously announced plan to adjust capacity as the woodproducts industry continues to battle lower demand and higherenergy costs.

The company has closed its Mobile, Ala. and Camden, Ark.mills, and completed the down-sizing of the Courtland, Ala.mill. The closure of the Lockhaven, Pa. mill is proceeding onschedule, IP said.

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

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

International Paper makes paper, packaging and wood andbuilding products, as well as being the largest private forestlandowner in the world. It has operations in nearly 50countries, employs more than 117,000 people and exports itsproducts 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 7percent as an outbreak of mad cow disease in Europe pushed theregion's sales down 10 percent and threatened to weaken thecompany's first quarter results.

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

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

BSE is a chronic degenerative disease affecting the centralnervous system of cattle and is believed to be contracted throughfeed containing animal by-products. It has been linked to asimilar brain-wasting disease in humans.

CEO Jack Greenberg said in a statement that he expects adifficult first quarter of 2001 due to continued mad cow concerns,tough comparisons from last year, and an extra trading day in2000.

"We expect the first quarter to be very challenging, due tooutstanding results and an extra trading day in 2000, andcontinuing consumer confidence issues about European beef," hesaid.

The company has been battling public fears with stepped upadvertising and greater promotion of nonbeef products.

Sales to Europe, the company's second-largest market behindthe 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 JoeBuckley, who in June lowered his rating on McDonald's shares toneutral due to broader international concerns, includingfluctuations in the euro. "The problem with mad cow is that it isan unknown. No one knows how long these concerns last."

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

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

"Despite a number of operating challenges, our worldwidecomparable sales were positive and systemwide sales increasedseven percent in constant currencies for the year," Greenbergsaid.

The company plans to add about 1,700 restaurants in 2001, hesaid. The company said that 2001 per share earnings were expectedto grow between 10 percent to 13 percent, excluding the impact of foreigncurrency 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, itpurchased $2.0 billion worth.BACK TO TOP

Qwest Tops Wall Street

Telephone and data servicesprovider Qwest Communications todayposted a better-than-expected 44 percent jump in fourth-quarterprofits, propelled by robust growth in Internet, data andwireless 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 ontrack to meet its targets for 2001 revenues and earnings beforeinterest, taxes, depreciation and amortization, or EBITDA, akey measure of a company's performance.

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

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

The Denver-based company said pro forma profits excludingone-time items rose to $270 million, or 16 cents a dilutedshare, compared with $188 million, or 11 cents a share, a yearago.

The results beat Wall Street expectations of 14 cents ashare, according to research firm First Call/ThomsonFinancial.

"With the initial integration of the [U S West] mergersuccessfully completed, we are on track to meet our expectedgrowth rates," Chairman and Chief Executive Joseph Nacchio saidin a statement.

Qwest said revenues rose 9.9 percent to $5.02 billion. Theincrease was driven by growth of almost 40 percent in Internetand data services.

Wireless revenues rose 90 percent to almost $150 million.The number of wireless customers increased to more than805,000, above the company's target of 800,000 for the end of2000.

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

Shares of Qwest have fallen about 10 percent amid sharpdeclines throughout the telecom sector over the past year. Itsstock has underperformed the Standard & Poor's 500 index byabout 4 percent.

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

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

It also said it expected to file with the FederalCommunications Commission to enter long-distance service inseveral states by the end of 2001.

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

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

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

Qwest reiterated that it expected 2001 revenues to be inthe 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 biggestchallenge facing Qwest was to meet its target of 20 percentlong-term EBITDA growth.

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Whirlpool Reiterates Job Cuts

Appliance maker Whirlpool metWall Street's lowered fourth-quarter earnings expectations andaffirmed its global restructuring plan will mean up to 6,000 jobscut in the coming year.

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

All told, the company shake-up — which will pare 10 percent ofWhirlpool's 60,000-member work force — will result in pre-taxcharges 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 astatement. "We believe that our strong brands, global platform,innovative products and consumer focus — combined with ourrestructuring efforts and the associated lower cost structure -will produce a strong operational performance and solid financialresults 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 expecting99 cents per share, having lowered their estimate from $1.42 ashare after Whirlpool issued an earnings warning last month. At thetime, Whirlpool blamed intensified price competition, risingmaterial costs, and slowing or declining demand.

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

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

The North American appliance industry has been expected to bedown 7 percent to 8 percent in the fourth quarter versus the sameperiod in 1999, Whirlpool said last month. Earlier companyestimates forecast a fourth-quarter decline in industry shipmentsof 2 percent to 3 percent.

Whirlpool has said its restructuring involves a reduction andreconfiguration of global operations, including the closure of someplants.

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

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

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