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AT & T Profit Soars 60% on Cost-Cutting

From Times Wire Services

AT&T; Corp.'s second-quarter earnings climbed 60% as aggressive cost-cutting at the leading U.S. long-distance phone company helped offset stalled revenue growth.

Profit from continuing operations before gains and charges rose to $1.49 billion, or 91 cents a diluted share, from $928 million, or 57 cents, a year earlier. Analysts had expected a profit of 90 cents. Revenue inched up 1% to $12.86 billion.

Chief Executive C. Michael Armstrong is boosting earnings by slashing costs and focusing on data services and other fast-growing markets, pushing profit above expectations for the fourth straight quarter. Still, although forecasts call for sales growth of 2% to 4% this year, AT&T; trails rivals such as WorldCom Inc., whose second-quarter revenue surged 32%.

AT&T; shares rose 94 cents to close at $58.63 on the New York Stock Exchange.

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Separately, WorldCom, the No. 4 U.S. long-distance company, said second-quarter earnings rose more than fivefold on surging sales of Internet and other data services.

Net income rose to $227.5 million, or 21 cents a diluted share, from a pro forma $41.6 million, or 4 cents, a year earlier. Results were a penny above the average estimate of analysts.

WorldCom’s profit is soaring as companies turn to the Internet for information and to conduct business, and as its investments in high-growth international and local phone services start to pay off. Its stock price is soaring too as it nears completion of its purchase of No. 2 long-distance company MCI Communications Corp.

Shares of WorldCom rose $1.06 to close at $55.38 on Nasdaq.

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Also reporting second-quarter earnings was No. 1 local phone company Bell Atlantic Corp., which said profit rose 11% as it increased sales of data, wireless and enhanced customer services.

Profit before charges rose to $1.07 billion, or 68 cents a diluted share, from $964.7 million, or 62 cents, before charges, a year earlier. The results matched the average estimate of analysts.

Revenue rose 2.9% to $7.93 billion.

At a Glance

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Other earnings, excluding one-time gains and charges unless noted:

OIL

* Chevron Corp.'s second-quarter earnings fell 26% to $620 million, or 94 cents a diluted share. Analysts had expected 75 cents a share. For the l company, the nation’s third-largest refiner, strong profit from refining and fuel sales partly offset low prices for crude oil. Revenue fell 22% to $7.97 billion.

* Phillips Petroleum Co.'s second-quarter profit tumbled 29% to $152 million, or 58 cents a diluted share. The results exceeded estimates by 2 cents. The company’s performance was hurt by lower oil prices and reduced chemical earnings as oversupply pushed down prices for its major chemical product, ethylene. Revenue fell 20% to $3 billion.

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* Shell Oil Co. said its second-quarter profit fell 34% to $312 million on lower chemical earnings and falling crude oil prices. The wholly owned unit of Royal Dutch/Shell Group does not report per-share earnings. Revenue fell 29% to $5.03 billion.

* Sun Co., the nation’s No. 2 independent oil refiner, said second-quarter earnings fell a less-than-expected 12% to $92 million, or 97 cents a share, as maintenance at its East Coast refineries reduced its production and lower gasoline margins cut its fuel sales profit. Analysts had expected 78 cents a share. Revenue fell 15% to $2.19 billion.

* Tosco Corp., the largest independent U.S. oil refiner, said second-quarter profit increased 49% to $100.3 million, or 61 cents a diluted share, exceeding estimates of 47 cents, as improved profit margins on West Coast gasoline sales far offset declines in margins on the East Coast. Tosco, which also owns the Circle K convenience store chain, said total sales were flat at about $3.2 billion.

CONSUMER PRODUCTS

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* Alberto-Culver Co. said profit increased 10% for its fiscal third quarter to $21.2 million, or 35 cents a diluted share, meeting expectations, as sales edged up 2.5% to $367.5 million.

* Church & Dwight, which makes Arm & Hammer brand products, said net income rose 8.1% to $7.87 million, or 39 cents a share, a penny higher than forecasts, as sales rose 16% to $7.28 million.

* Colgate-Palmolive Co.'s second-quarter earnings rose 16% to $203.5 million, or 62 cents a diluted share, a penny higher than estimates, as strong profits in North America, Latin America and Europe offset weakness in Asia. Revenue fell 1.9%, hurt by the strong dollar. Cost-cutting and standardized packaging helped boost gross profit margins.

* Dial Corp. said second-quarter profit rose 26% to $25.6 million, or 25 cents a share, matching forecasts, as sales grew 5% to $366.8 million.

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* Quaker Oats Co. said second-quarter earnings jumped 20% to $107 million, or 76 cents a diluted share, surpassing the 71 cents analysts had forecast. Revenue from continuing operations rose 6.7% to $1.38 billion. Hot weather and heavy advertising boosted sales of Gatorade, which accounts for a third of total revenue, by 17% in North America and 9.5% internationally.

INSURANCE

* American International Group Inc. said second-quarter earnings rose 14% to $924.7 million, or $1.32 a diluted share, led by gains at its life insurance and financial services division. Revenue increased 5% to $8.14 billion.

* Lincoln National Corp., the No. 3 seller of variable annuities, saw second-quarter earnings rise a better-than-expected 15% to $132.2 million, or $1.30 a diluted share, bolstered by its acquisition of Cigna Corp.'s individual life insurance business. Analysts were expecting $1.25.

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* Marsh & McLennan Cos., the world’s largest insurance broker, said second-quarter earnings rose 33% to $193.4 million, or 72 cents a diluted share, beating analyst forecasts by 2 cents. The results were fueled by gains at its Putnam Investments fund management unit.

FINANCIAL SERVICES

* American Bankers Group said second-quarter operating profit increased 5% to $28.0 million, or 60 cents a diluted share, in line with forecasts, as investment income grew 9.6%. The company, which sells insurance that covers loans when borrowers die or lose their jobs, plans to be acquired by Cendant Corp. for $3.1 billion.

* Bankers Trust Corp. said its operating profit rose 7% in the second quarter to $228 million, or $2.06 a diluted share, beating analysts expectations of $2.03, as net income from investment banking and trading for clients offset losses in Latin America and Asia. The nation’s seventh-largest bank in terms of assets said revenue edged up 0.1% to $1.55 billion.

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* First Data Corp.'s second-quarter profit from continuing operations rose 3% to $166.2 million, or 37 cents a diluted share, meeting analyst expectations, as it continued to divest unprofitable operations. The payment system and credit card services company said revenue from continuing operations rose 11% to $1.26 billion.

OTHER INDUSTRIES

* Adolph Coors Co.'s second quarter profit rose 8.2% to $39.5 million, or $1.06 a diluted share, beating analyst forecasts by 4 cents. The brewery’s revenue rose 4.1% to $541.9 million.

* Copper producer Asarco Inc. reported a less-than-expected second-quarter loss of $14.5 million, or 37 cents a diluted share, contrasted with profit of $38.5 million, or 89 cents, a year ago. Higher production and cost-cutting helped offset lower metals prices. Analysts expected a loss of 39 cents. Revenue fell 19% to $602.3 million.

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* Baxter International Inc., the world’s second-largest medical technology company, said second-quarter profit rose 10% to $179 million, or 62 cents a diluted share, matching estimates, as demand increased for some dialysis and infusion products. Revenue grew 5% to $1.65 billion.

* Dow Chemical Co. said second-quarter profit dropped 18% to $425 million, or $1.86 a diluted share, slightly better than the $1.84 analysts expected, as revenue fell 9.5% to $4.9 billion. The company said falling prices for chemicals and weaker demand in Asia offset the benefits of lower raw materials costs. Dow Chemical also said it’s in talks to buy the 32% of Mycogen Corp. it doesn’t already own. Dow is now bound by an agreement with the San Diego-based agriculture biotechnology company not to raise its stake beyond 68%.

* Fort James Corp., maker of consumer and business paper goods, said second-quarter profit rose 24% to $142.1 million, or 65 cents a diluted share, a penny higher than analyst forecasts, boosted by reduced costs and higher prices for its tissue. Revenue rose less than 1% to $1.86 billion.

* Gateway Inc. said its second-quarter earnings increased 7.5% to $60.7 million, or 38 cents a diluted share, much less than the 44 cents analysts had expected, as the direct seller of personal computers suffered from falling prices and weak demand. Results were also hurt by increased marketing costs. Sales rose 16% to $1.62 billion. The company, which reported results after the close of trading on Thursday, said sales were strong in Asia but dropped in Europe.

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* Houghton Mifflin Co. said second-quarter earnings fell 30% to $7.82 million, or 27 cents a share, far better than the average analyst estimate of 9 cents. The book publisher said increased textbook orders helped offset higher spending for products and services and technology to prepare its computer systems for the year 2000 situation. Revenue rose less than 1% to $202.7 million.

* Maytag Corp.'s second-quarter net income soared 55% to $67.9 million, or 71 cents a diluted share, exceeding analyst estimate of 68 cents. Sales jumped 25% to $1.02 billion, fueled by new home and commercial appliances and a retail agreement with Sears, Roebuck & Co.

* Monsanto Co.'s second-quarter profit fell 16% to $270 million, or 43 cents a diluted share, a penny short of the average estimate. The agricultural and biotechnology company said increased spending to develop new products and purchase businesses offset an 18% jump in sales to $2.47 billion. In June, Monsanto agreed to merge with drug maker American Home Products Corp. in a $35-billion stock swap. The company also announced several other acquisitions in the quarter.

* Pulte Corp., the nation’s largest home builder, said second-quarter earnings rose 88% to $23.8 million, or 54 cents a diluted share, far exceeding forecasts of 42 cents, amid a strong market for housing. Revenue rose 18% to $679.7 million.

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* RJR Nabisco Holdings Corp. said its second-quarter operating earnings dropped 24% to $186 million, or 54 cents a diluted share, missing forecasts by a penny, on lower profits from its international cigarette and Nabisco cookie and cracker businesses. The company said revenue was flat at $4.29 billion. Revenue from domestic tobacco rose 15%, as price increases more than offset a 3% decline in consumption and 4% decline in shipments. Foreign tobacco revenue fell 13% as unit sales dropped 8%.

* Raytheon Co.'s second-quarter net income jumped 25% to $262.6 million as revenue climbed 53% to $5.08 billion, driven by a series of acquisitions. Per-share earnings were 77 cents a diluted share, a penny higher than estimates, and down from 88 cents a year go, reflecting the 102.6 million shares the aerospace and defense company issued when it bought GM’s Hughes Electronics defense business last year.

* Southwest Airlines Co.'s second-quarter earnings soared 42% to $133.4 million, or 57 cents a diluted share, 3 cents better than forecasts, on a 12.7% jump in revenue to $1.08 billion. The low-fare carrier benefited from the strong travel demand and plummeting fuel prices that have boosted earnings at other airlines. Southwest also said it will split its stock 3-for-2, raise its dividend 12% and increase the size of a planned share buyback.

* United Asset Management Corp. said second-quarter profit declined 7.9% to $22.1 million, or 32 cents a diluted share, in line with estimates, after clients withdrew a net $4.3 billion from the money management company. Revenue rose 16% to $254.4 million.

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* USX-U.S. Steel Group Inc., the top U.S. steelmaker, said second-quarter earnings fell 1.8% to $108 million, or $1.16 a diluted share, better than estimates of $1.13, as sales edged down 0.2% to $1.73 billion. USX said the strikes at GM, blast furnace outages and lower steel prices weakened results.

* W.R. Grace & Co.'s second-quarter profit from continuing operations jumped 27% to $25.5 million, or 32 cents a diluted share, exceeding forecasts of 28 cents, as cost-cutting and higher sales of oil-refining chemicals helped offset the impact of the strong dollar and weaker Asian demand. Revenue slipped 2.3% to $369.9 million.

* Xerox Corp. said second-quarter profit rose 17% to $395 million, or $1.09 a diluted share, exceeding estimates, as the world’s biggest copier company sold more service contracts and high-priced digital copiers and cut costs. Revenue grew 9% to $4.74 billion. Analyst estimates ranged from $1.05 to $1.09. The results exclude charges of $1.12 billion, or $3.28 a diluted share, for a restructuring that cut 9,000 jobs, or 10% of its work force.

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Bloomberg News and Associated Press were used in compiling this report.


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