Earnings Reports for July 19

— -- Boeing Bests Street Estimates

Second-quarter profits at The Boeing Co. fell11.6 percent, in part because of a one-time charge associated withits rocket program, but the aerospace giant still beat Wall Streetexpectations comfortably. For the three months ending June 30, Boeing made $620 million, or71 cents per share on sales of $14.8 billion, the company said. A year ago, the company made $701 million, or 75 centsper share, on sales of $15.1 billion. Sales were off 2 percent from1999.

Excluding the one-time charge, Boeing earned 75 cents per sharein the second quarter, ahead of analysts’ estimates of 67 cents,according to a survey by First Call/Thomson Financial.

The one-time charge of $34 million is due to the planneddemonstration launch of the Delta III rocket in August. The companyannounced earlier in the quarter that it would launch nothing but adummy payload on the Delta III to ease concerns over the rocket’ssafety after the first two launches failed.

One bright spot for Boeing was in its commercial aircraftdivision. While revenues fell slightly, to $9.9 billion from $10.1billion in 1999, operating earnings rose 97 percent to $882 millionfrom $448 million a year ago.

Boeing received 200 orders for new aircraft in the secondquarter and a total of 328 orders for the year to date. Afterfirst-quarter deliveries were curtailed by a strike by Boeing’sengineering and technical workers, Boeing delivered 167 aircraft inthe second quarter.

With 242 aircraft delivered so far this year, Boeing officialssaid they were on target for their pre-strike estimate of 490aircraft deliveries by the end of the year.

Sales in Boeing’s military aircraft and missiles divisionremained level, but profits fell from $368 million in 1999 to $250million this quarter, a drop of 32 percent.

Boeing saw operating losses in its space and communicationsdivision, losing $38 million on $1.8 billion in sales, comparedwith profits of $94 million on $1.7 billion in sales a year ago.

For the six months ended June 30, Boeing earned $1.04 billion onrevenue of $24.75 billion, compared with $1.17 billion on revenueof $29.51 billion in the year-ago period. Both figures includeone-time items.

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Sales Overseas Boost Coca-Cola

A stronger global economy and savings from a recent restructuring were credited by Coca-Cola Co. for second-quarter operating earnings that surpassed Wall Street expectations. Atlanta-based Coca-Cola, the world’s largest soft drinkscompany, earned 44 cents a share, excluding nonrecurring items,in the quarter. Analysts had expected 41 cents a share.

Including charges related to the company’s recentrealignment and planned inventory reduction, earnings were $926million, or 37 cents per share, down from $942 million, or 38cents a share, a year earlier.

Second-quarter revenue jumped 5 percent, to $5.62 billionfrom $5.33 billion in the 1999 period.

“The results are very, very encouraging, but consistencywill be critical to Coca-Cola’s relative stock priceperformance,” said Lehman Brothers analyst Michael Branca.

Coca-Cola reported worldwide unit case volume, a key measureof financial health in the soft drinks industry, increased inthe second quarter by 7 percent on a reported basis and morethan 5 percent on a comparable basis.

Volumes in Coca-Cola’s North American market, whichanalysts have cited as a key barometer of the company’sfortunes, increased little more than 1 percent in the secondquarter.

“The only place that looks weaker than expected is NorthAmerica, but Europe looks terrific,” said Caroline Levy, ananalyst with UBS Warburg in New York.

Coca-Cola said soft North American sales volumes in“future-consumption channels,” primarily in supermarkets,continued to reflect the impact of a decision to raise theprices it charged its bottlers for the concentrate used to makesoft drinks.

Higher concentrate prices generally translate into highersoft drink prices for many consumers.

Coca-Cola’s results, especially in Europe, appeared toindicate that the company was well on its way to rebounding fromits performance in 1999, which was marred by a disastrouscontamination scare and product recall in Belgium and France.

During the second quarter, Coca-Cola completed a massiverestructuring of operations, marked by about 5,000 layoffs, in amove to decentralize the company and make it more responsive todevelopments in its roughly 200 markets around the world.

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Record Earnings, Net Loss at Ford

Ford Motor Co., theworld’s No. 2 automaker, reported record operatingearnings of $2.7 billion for the second quarter, up 10 percentfrom a year earlier and surpassing Wall Street expectations. Butone-time charges resulted in the company’s first net loss since1992. Operating earnings of $2.20 per share, including results ofthe Visteon Corp. parts unit, exceeded analysts’ consensusestimate of $2.01. In the 1999 second quarter Ford had operating earnings of $2.48billion, or $2 per share.

Ford took one-time charges of $3.3 billion in the secondquarter related to its June spin-off of Visteon and a Europeanrestructuring, which including ending vehicle production at itsDagenham plant in England, eliminating a net 1,400 jobs.

Including the charges, Ford lost $577 million, or 47 centsper share, in the second quarter, compared with a year-earlierprofit of $2.34 billion, or $1.89 per share, also includingone-time charges.

Analysts applauded Ford’s results. “Great numbers,” saidDavid Bradley, an analyst with J.P. Morgan.

Ford’s second-quarter revenues rose 6 percent to a record$44.5 billion. Worldwide vehicle unit sales were also a record,rising to 1,991,000 from 1,928,000 a year earlier.

The automaker’s worldwide automotive operating earnings rose15 percent to $2.1 billion, almost entirely due to strong salesof pickups, minivans, sport utility vehicles and luxury cars inits core U.S. market.

Ford’s North American automotive division had recordoperating earnings of $1.84 billion in the second quarter, up7.4 percent from the same period a year ago, boosted by popularnew products such as the Explorer Sport Trac crossover sportutility/pickup truck and the Jaguar S-Type.

Earnings for Ford Credit, the world’s largest automotivefinance company, rose 16 percent to $388 million in the secondquarter due to higher volumes and improved net financingmargins.

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IBM Beats Estimates on Revenue Slide

International Business Machines Corp. reported a 1 percent revenue decline and earningsthat beat estimates, as the world’s No. 1 computer makercontinued to be hurt by problems in its hard disk drive andpersonal computer businesses. The Armonk, N.Y.-based company said net income rose to $1.9billion, or $1.06 a share, from $1.7 billion, or 91 cents,excluding special items, in the second quarter of 1999. Revenuefell 1 percent to $21.7 billion from $21.9 billion in the sameperiod a year ago.

That topped the consensus estimate of $1, according toanalysts surveyed by First Call/Thomson Financial.

IBM, which has shown slack sales for much of the past year,had posted a 5 percent drop in revenues for the first quarter,in stark contrast to rivals such as Sun Microsystems Inc., whose revenues have accelerated by 35 percent or more.

IBM said the 1999 second-quarter earnings, including thebenefit of 37 cents per diluted share from the sale of itsGlobal Network unit and other 1999 actions, totaled $1.28 pershare.

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McGraw-Hill Earnings Jump 20%

The McGraw-Hill Cos., corporate parent of theStandard & Poor’s stock indexes, reported a 20 percent jump inearnings on stronger results from Business Week magazineand textbook sales. McGraw-Hill earned $107.9 million compared to $90 million in thesame quarter a year ago as revenues rose 11 percent to $1.02billion from $922.7 million. Per-share earnings rose to 55 centsfrom 45 cents, beating analysts’ expectations of 52 cents.

Most of the growth in McGraw-Hill’s second-quarter revenues camein its large educational division, which sells textbooks, CD-ROMsand other classroom materials. The company cited higher sales inthe elementary and high school markets for a 22 percent increase inquarterly revenues to $451.6 million.

Contributing just as much to bottom-line profitability, however,were more gains at McGraw-Hill’s media division, which includesBusiness Week magazine, a leading weekly that has been riding awave of surging readership and ad spending. Ad pages, a widely usedbarometer of health for magazines, rose 44 percent in the secondquarter.

Revenues from the media division rose 16 percent and operatingprofits surged 41 percent.

Revenues from financial services rose 6 percent to $316.8million as Standard & Poor’s continued to grow beyond its corebusiness areas, which in addition to stock indexes also includecredit rating services for bonds and other securities. S&P expandedits business in Europe and its sales of quote feeds to Internetsites.BACK TO TOP

UAL Earnings Grow 17%

UAL Corp., the parent of United Airlines, said second-quarter earnings rose 17 percent from theprevious year to $408 million as the company overcame higher fuelcosts and what it described as “operational disruptions.” Earnings per share on a fully distributed basis were $3.47,excluding two special charges, topping results from the samequarter last year and outpacing Wall Street expectations. Second-quarter 1999 net earnings were $349 million or $2.86 pershare.

According to First Call/Thomson Financial, analysts had onaverage expected the company to earn $3.24 a share fullydistributed in the quarter, before the special charges.

“Earnings were higher than expected, but they did give awarning about the rest of the year,” said Ray Neidl with INGBarings. Also, the world’s largest oil producers are now saying aproposed production increase is unnecessary, meaning jet fuel costscould continue to rise, Neidl said. The company recorded special charges of $38 million in thesecond quarter of 2000 for the planned replacement of the in-flightvideo system on certain aircraft and the early retirement of sevenleased aircraft.

United, based in suburban Elk Grove Village, across from O’HareInternational Airport, is the world’s largest airline.

Besides soaring fuel costs in the quarter, the company said ithad to overcome an “abnormally high rate of delays andcancellations due to unusually bad weather, air trafficcontrol-related difficulties and the impact of crew issues.”

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“Strong global demand for Nextel’s differentiated serviceproduced another record-setting quarter. Increased revenue andnet subscriber additions and record cash flow are particularlypleasing in light of the increasingly competitive national andglobal wireless marketplace,” said Nextel Chief Executive TimDonahue, in a statment.

Nextel’s telephones offer a two-way “walkie talkie”feature, in addition to traditional wireless services, thatappealed to traditional blue collar industries such asconstruction or landscaping.

Nextel, however, has been working to expand its customerbase. White-collar customers comprise about 30 percent of itscustomers and that market its fastest-growing segment.

To support the soaring subscriber growth, Nextel’s domesticcapital spending rose to $686 million in the second quarter,compared with $661 million in the first quarter of 2000.

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Philip Morris Earnings Match Estimates

Philip Morris Cos. said profit rose 7 percent in thesecond quarter, reflecting gains in cigarette sales domesticallyand abroad as well as growth in its Kraft Foods division.

The company earnings totaled $2.17 billion, or95 cents a share, in the three months ended June 30, up from $2.03billion, or 84 cents a share, a year earlier.

This year’s results matched the 95 cents expected by analystssurveyed by First Call/Thomson Financial.

Revenues for the April-June period were $20.84 billion, up 5.2percent from $19.81 billion in 1999, the company said. The resultsexclude discontinued operations as well as a pre-tax charge foremployee severance packages. “Ourdomestic tobacco business generated good volume and income growth,and volume growth returned to our international tobacco business asit benefited from the continued economic recovery in Asia andRussia,” said Geoffrey C. Bible,chairman and chief executive officer.

There was no mention of the $145 billion in punitive damagesthat a Florida jury last week ordered five major tobacco companies,including Philip Morris, to pay to sick Florida smokers. Thecompanies have said they will appeal the ruling.

The latest earnings report also did not factor in Philip Morris’purchase late last month of Nabisco Holdings, the maker of Oreo andChips Ahoy cookies and Ritz crackers, for $14.9 billion from R.J.Reynolds Tobacco, which also was a defendant in the Florida case.

Philip Morris’ domestic tobacco income grew 6.5 percent to $1.3billion due to higher pricing and increased shipments towholesalers, the company said. Its share of overall domestictobacco shipments rose 1 percentage point to 49.9 percent, it said.

Tobacco income abroad was up 4.6 percent to $1.3 billion onvolume gains in Western Europe, Russia, Japan and Asia, it said.

In the food business, income rose 5.3 percent to $996 million inNorth America on volume gains, productivity savings and lowercommodity costs.

Earnings at the Miller Brewing Co. rose 8.4 percent to $193million in the second quarter on higher pricing and contractbrewing. But shipments slipped 2.7 percent to 11.9 million barrels.

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Profits Down at Charles Schwab

Charles Schwab Corp., the largest discount and Internet brokerage in the United States, said second-quarter profits fell 20 percent due to a charge forbuying money management firm U.S. Trust.

San Francisco-based Schwab, which has 7.2 million brokerageaccounts, said it earned $137.1 million, or 9 cents per dilutedshare, in the second quarter. That compared with a profit of$170.5 million, or 12 cents per share, in the year-ago quarter.Net revenues rose 26 percent to $1.4 billion.

Schwab, which started as a discount broker some 25 yearsago, earlier this year agreed to buy U.S. Trust for $2.7billion, in a move to become a full-service brokerage. Excludingthe $44 million charge for buying U.S. Trust and otheracquisition charges totalling $17 million, Schwab’s quarterlyprofits rose 17 percent to $198.8 million, or 14 cents perdiluted share.

The operating results matched Wall Street’s loweredexpectations of 14 cents per share, according to market researchfirm First Call/Thomson Financial. Analysts in recent months hadcut their profit forecasts for Schwab because the Nasdaq stockmarket and stock trading volumes slumped more than 10 percent inthe quarter. One of Schwab’s online competitors, DLJdirect, also reported a sharp fall in online trading volumes from therecord first quarter. The broker, an affiliate of investmentbank Donaldson Lufkin & Jenrette, reported abigger-than-expected loss in the second quarter due to increasedadvertising spending.

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Time Warner Net Earnings Held Down

Time Warner Inc., the world’s largest mediacompany, reported stronger operating results across its variousbusinesses. Net profits were held down by several charges,however, including expenses related to its acquisition by AmericaOnline Inc. Time Warner, whose brands include CNN, Time magazine and WarnerBrothers, reported net earnings of $75 million for the secondquarter ending June 30, or 5 cents a share. That compared to $593million or 43 cents a share in the same period a year ago.

Revenue rose 8 percent to $7.08 billion from $6.53 billion.

The charges in the most recent quarter include $31 million inmerger costs, $7 million in losses related to exchanges of cablesystems, and $50 million toward paying a court verdict against itsformer interest in Six Flags amusement parks.

Taking out those charges and a gain of $771 million in theyear-ago period on profits from selling cable systems, the NewYork-based company earned 11 cents per share, unchanged from thesame period a year ago. Wall Street analysts surveyed by FirstCall/Thomson Financial had expected earnings of 8 cents per share.

Investors pushed shares of Time Warner lower in late morningtrading on the New York Stock Exchange. Shares fell $1.188 to $88.

Time Warner is finalizing its ambitious combination with AOL,which shareholders from both companies approved a month ago. InMay, the companies announced a new management lineup that givesgreater authority to Bob Pittman, who is currently AOL’s president.

Federal regulators are still reviewing the proposed deal. ButTime Warner chairman and chief executive Gerald Levin said todaythe company is still confident of receiving a go-ahead fromregulatory agencies this fall.

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Profits Up at Genentech

Biotechnology firm Genentech Inc. reported a 7 percent gain insecond-quarter profits, meeting Wall Street estimates, amidstronger sales of its cancer medicines.

The biotech bellwether said its income rose to $78.2million, or 29 cents a share, from $73.2 million, or 27 cents,in the year-ago quarter. Wall Street analysts had expected thecompany to earn 29 cents a share, according to FirstCall/Thomson Financial.

Revenues for the quarter rose 10 percent to $413.6 million,driven primarily by sales of breast cancer drug Herceptin andRituxan for non-Hodgkin’s lymphoma. Sales were also lifted bygains on the sale of certain marketable equity securities.

Second-quarter sales of Herceptin increased 44 percent to$66.7 million compared to $46.2 million in the second quarter of1999. Sales of Rituxan increased 38 percent to $102.8 millionfrom $74.4 million in the second quarter of 1999.

The quarterly profit increase was before the ongoing impactof the redemption of Genentech’s special common stock andrelated accounting treatment. As a result of theredemption-related charges, the company recorded a net loss forthe second quarter of $14.2 million, or a net loss per share of5 cents. The company recorded a net loss of $923.2 million or$3.59 per share for the second quarter of 1999.

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Pepsico Profits Up by 21 Percent

Food and beverage giant Pepsico posted a better-than-expected 21percent rise in second-quarter earnings, driven by double-digitgains at its salty snacks and juice businesses.

The Purchase N.Y.-based company, which controls more thanhalf of the U.S. snack-chip market and about 30 percent of thesoft drink market, said profits rose to $563 million, or 38 centsper share. That’s up from $467 million, or 31 cents a share, in the sameperiod a year earlier.

Analysts polled by First Call/Thomson Financial had expectedthe maker of Frito-Lay snacks and Tropicana juices as well asPepsi and Mountain Dew, to earn 36 cents a share.

Second-quarter revenue rose nearly 9 percent, to $4.9billion from $4.5 billion in the year-earlier quarter.

Second-quarter profits soared 27 percent at Pepsico’sFrito-Lay International unit, led by strong performances inMexico and the United Kingdom and a successful “Pokémon”promotion across Latin America.

Double-digit volume growth in Cheetos, Tostitos and Rufflessnacks fuelled revenue growth of 7 percent, to $2 billion, atFrito-Lay North America. Volume was 5 percent higher, reflectingsolid growth in potato chips and variety packs and the successof new products, especially Ruffles Flavor Rush and Frito-LaySnack Kits.

Pepsico’s Tropicana Pure Premium juice unit posteddouble-digit volume growth in the quarter, and operating profitgained 17 percent to $51 million. Tropicana benefited from loweringredient costs, while higher volume improved manufacturingefficiency.

Bottler case sales in North America were flat in thequarter, reflecting a modest decline in concentrate brands and astrong gain by non-carbonated brands, especially Aquafina.

Overseas, double-digit volume gains in China, India,Thailand, Germany and Japan.

“We believe our commitment to innovation and ourunparalleled distribution capability can drive consistentdouble-digit earnings per share growth in the second half of2000 and beyond,” said Roger Enrico,the company’s chairman and chief executive.

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The Associated Press and Reuters contributed to this report.