Quaker Income Up; Chairman Named

Quaker Oats Co. on Thursday named a former Kraft Foods executive to be its chairman, president and chief executive, as it also posted stronger-than-expected third-quarter earnings before charges.

Quaker named Robert Morrison to the top job, effective immediately, replacing William Smithburg, who said six months ago he would retire from the company after 16 years as CEO.

Morrison’s appointment came a day after Kraft Foods Inc., a unit of Philip Morris Cos. Inc., said the 55-year-old executive had resigned.

“I think the momentum is positive and my expectation is, with a strong management team, we’ll be able to continue on that momentum,” Morrison said as he and Smithburg shared the spotlight during a Quaker conference call with analysts to discuss third-quarter results.

Excluding gains and charges, Chicago-based Quaker reported third-quarter earnings of 79 cents a share, beating Wall Street estimates of 70 cents and last year’s 53 cents.

Sales in the quarter fell 5% to $1.37 billion from last year’s $1.44 billion, which included $161.4 million in sales from divested businesses.

The per-share earnings exceeded Wall Street’s expectations.

Quaker’s net earnings for the quarter were $77.5 million, or 58 cents a share, after restructuring and other charges. A year ago, net earnings were $133 million, or 98 cents a share, which included a gain on divestitures and other unusual items.

Quaker said its total operating income for its Gatorade sports drink, excluding a charge, rose to $89.9 million, from $71.3 million. Sales rose 14% to $494.5 million.

Quaker’s earnings helped bolster the company’s shares in a sharply lower stock market as they traded as high as $49.50 before closing at $47.69, losing 25 cents, on the New York Stock Exchange.

Higher earnings and a change at the helm marked a transition for Quaker, which has undergone an extensive restructuring, including the divestiture of businesses.

Quaker, with brands that include Cap’n Crunch cereal, Quaker oatmeal and Rice-a-Roni side dishes, also suffered losses from Snapple beverages, which Quaker bought in 1994 for $1.8 billion and sold this year for $550 million.

Asked about his management style for Quaker, Morrison said he would continue to focus on building sales and lowering costs.

“You start with an assumption that we’ve got to find ways to increase shareholder value, and that means we have to get our earnings up,” Morrison said.

At a Glance:

Strong sales of new anti-cholesterol and diabetes drugs drove a 30% third-quarter earnings increase for Warner-Lambert Co. The drug maker earned $198.3 million, or 73 cents a share, compared with $152.7 million, or 56 cents a share, in the comparable 1996 period.

Delta Air Lines reported a 6.7% increase in its third-quarter profit, and Southwest Airlines posted a 52% earnings rise.

Delta earned $254 million, or $3.34 a share, compared with $238 million, or $3.09 a share, a year earlier. Southwest earned $92.5 million, or 60 cents a share, for the three months ended Sept. 30, compared with $60.9 million, or 40 cents a share, last year.

America West Holdings Corp. posted higher third-quarter profit of $17.9 million, or 40 cents a share, from $2 million, or 5 cents, in the same quarter last year.

Tosco Corp. said third-quarter earnings more than doubled on strong profit from refining on the West and East coasts. Tosco reported net income of $100.9 million, or 63 cents a share, compared with $42.5 million, or 32 cents, in the year-ago quarter.

Marsh & McLennan Cos. said third-quarter earnings rose 36% to $140 million, or 83 cents a share, from $102.6 million, or 72 cents, a year earlier. The year-ago number was adjusted for a 2-for-1 stock split in June.

American International Group Inc. said third-quarter earnings rose 15% to $824.8 million, or $1.18 a share, from $717.2 million, or $1.01, in the same period a year ago.

Amazon.com reported a third-quarter loss that widened from last year, posting a net loss of $8.5 million, or 36 cents a share, compared with a loss of $2.4 million, or 10 cents, a year ago.

Sara Lee Corp. said fiscal first-quarter earnings rose 9.2% to $225 million, or 46 cents a share, from $206 million, or 41 cents, in the year-earlier period.

Avon Products Inc. said its third-quarter earnings rose 9.8% to $68.6 million, or 52 cents a share, from $62.5 million, or 47 cents, a year earlier.

Adolph Coors Co. said third-quarter earnings rose 20% to $17.4 million, or 47 cents a share, from $14.6 million, or 38 cents, a year earlier.

Baxter International Inc.’s third-quarter profit fell 10% to $159 million, or 57 cents a share, matching Wall Street expectations. Earnings in the comparable 1996 period were $177 million, or 65 cents a share.

Xerox Corp. said third-quarter earnings rose 28% to $320 million, or 92 cents a share, from $250 million, or 71 cents, in the year-earlier period.

Wild Oats Markets Inc. said third-quarter net income soared to $1.8 million, or 25 cents per share, compared with $53,000, or 1 cent, in the year-earlier quarter.

Dow Chemical Co. reported lower third-quarter earnings of $422 million, or $1.85 per share, versus $469 million, or $1.92 a share, in the same quarter last year.

Apache Corp. said its third-quarter earnings rose slightly to $30.8 million, or 34 cents a share, from $30.1 million, or 34 cents, a year earlier.

CSX Corp. said third-quarter earnings dropped 7% because of expenses involving its acquisition of part of Conrail, posting net income of $206 million, or 95 cents a share, down from $222 million, or $1.04 a share, a year ago.

Wendy’s International Inc. posted a 13% increase in third-quarter earnings to $53 million, or 39 cents per share, in the three months ended Sept. 30, up from $46.9 million, or 36 cents per share, a year ago.

Gateway 2000 Inc. reported a third-quarter loss as it sold personal computers at lower-than-expected profit margins to get rid of excess inventory and also took two major charges. Gateway reported a loss of $107.1 million, or 68 cents a share, contrasted with net income of $60.7 million, or 39 cents, a year ago.

Bankers Trust New York Corp. said third-quarter earnings rose 22%, as its acquisition of Alex. Brown Inc. doubled profit from investment banking. Net income rose to $246 million, or $2.25 a share, from $202 million, or $1.85, a year ago.