Executive Business Briefing

Here is a look at more of Wednesday's top business stories:

Boeing tops Wall Street's expectations

CHICAGO, July 17 (UPI) -- Boeing Co. said its second-quarter net income declined to $751 million, or 92 cents a share, excluding non-recurring items, from $804 million, or 95 cents a share during the same period last year.

Revenue declined 10 percent to $13.85 billion from $15.51 billion a year ago.

But, Boeing exceeded analysts expectations on Wall Street, who had expected the aircraft builder to post a net income of 80 cents a share, according to Thomson Financial/First Call.

Boeing Co., a component of the Dow Jones Industrial Average, said its outlook for 2002 and 2003 remains unchanged.

The aerospace company expects 2002 revenue of about $54 billion, which is above a current Wall Street consensus view of $52.98 billion, according to Thomson Financial/First Call.

Boeing expects 2003 revenue of about $52 billion, which is also above a First Call projection of $50.32 billion.

In 2002 and 2003, the company expects operating margins at about 8.25 percent.

For 2002, the free cash outlook remains between $2.5 billion and $3.0 billion and in 2003 the company projects free cash flow at greater than $3 billion.

In 2001, Boeing earned about $3.01 billion, or $3.63 a share, excluding items, on revenue of $58.2 billion.

Boeing said its Commercial Airplanes division continues to resize in order to operate efficiently at lower airplane production and delivery levels.

Planned production and employment reductions are continuing on schedule, the company said.

The outlook for commercial airplane deliveries remains unchanged at about 380 in 2002 and 275 to 300 in 2003.

The delivery forecast is "essentially sold out" for 2002 and is now more than 90 percent sold for 2003, at the lower end of the range.

The outlook for single-aisle airplanes remains solid, said Boeing, though lower market demand for twin-aisle airplanes will hurt the mix of its 2003 deliveries.

In June, Boeing handed out another round of 60-day layoff notices to 1,300 workers, bringing the number of announced cuts since September to more than 28,000.

Boeing said the total cuts by the end of this year will be between 25,000 and 30,000.

Boeing noted that its Space and Communications' missile defense and integrated battle space programs will remain key growth areas in 2002 and 2003.

The company sees revenue growth from Military Aircraft and Missile Systems' aerospace support programs and increased deliveries of tactical fighters, rotorcraft and transport aircraft under multi-year contracts.

Boeing's free cash flow, or operating cash flow excluding capital expenditures, totaled $651 million for the second quarter and $927 million for the first six months. Ending cash and short-term investment balances totaled $816 million.

Consolidated debt at the end of the quarter rose to $13.2 billion from $12.9 billion at the end of the first quarter.

Total backlog at the end of the quarter was $123 billion, said Boeing, compared with $134.1 at the end of 2001.

Contractually committed backlog totaled $102.2 billion compared with $106.6 billion at year-end.

Commercial Airplanes' second-quarter segment revenue fell to $7.7 billion from $9.3 billion a year ago, as the division delivered 112 new jet airplanes during the quarter, compared with 141 a year ago.

Commercial Airplanes received 46 gross orders during the quarter and 166 during the first six months.

Military Aircraft and Missile Systems revenue for the second quarter rose 5.4 percent to $3.5 billion from $3.3 billion a year ago due to higher rotorcraft and tactical weapons deliveries.

Space and Communications' second quarter revenue rose 6.4 percent to $2.7 billion from $2.5 billion in 2001.

Boeing said the results for the quarter reflected strong performance and increased volume in the missile defense and integrated battle space programs, partially offset by fewer launches and commercial satellite deliveries and updated commercial satellite cost estimates.

Boeing Capital Corp. revenue rose 9 percent to $254 million from $233 million a year ago.

The Boeing Capital portfolio at the end of the quarter totaled $11.1 billion.

Earnings rise at Northrop Grumman

LOS ANGELES, July 17 (UPI) -- Northrop Grumman Corp., which builds the B-2 bomber and the unmanned Global Hawk spy plane, said its second-quarter net income was lifted by its $2.1 billion acquisition of shipbuilder Newport News.

The company, which completed the Newport deal early this year, said its second-quarter net income rose to $182 million, or $1.53 a share, from $175 million, or $2.01 a share during the same period last year.

Earnings excluding pension fund income, known as economic earnings, totaled $188 million, or $1.59 a share, a rise from last year's $137 million, or $1.57 a share.

Analysts on Wall Street were expecting Northrop to earn $1.46 a share, according to Thomson Financial/ First Call.

Northrop's total sales rose to $4.40 billion from $3.66 billion a year ago as revenue from its shipbuilding business more than doubled to $1.16 billion.

Northrop continued its acquisition binge in the second quarter, signing a deal to buy defense and auto parts group TRW Inc. for $7.8 billion after a four-month standoff.

The acquisitions enhance Northrop's ability to compete for different parts of the growing military budget, which has been boosted by the U.S. war on terrorism.

The company, slated to close the TRW deal in the fourth quarter, said it expected the combined firm would generate revenue of more than $26 billion in 2003.

The TRW deal gives Northrop, already the nation's largest shipbuilding and the second-largest maker of defense electronics components, a leading position in the market for military space equipment and the missile defense sector.

The Bush administration is trying to develop new technologies to transform the military into a mobile fighting force.

Northrop also reaffirmed its outlook for the rest of the year, forecasting economic earnings per share between $6.60 and $7.10, with revenue between $17.5 billion and $18 billion.

Excluding TRW, the company expects 2003 revenue between $20.0 billion and $20.5 billion, net earnings per share between $6.90 and $7.40, and economic earnings between $8.15 per share and $8.65 per share.

Double-digit increases in economic earnings, net earnings and revenue are expected in 2004, the company added.

Honeywell posts higher results

MORRIS TOWNSHIP, N.J., July 17 (UPI) -- Honeywell International Inc. said its second-quarter net income rose as aggressive cost cuts offset sluggish demand for its airplane electronics, brakes and tires in the wake of the Sept. 11 attacks.

The maker of Fram filters, turbochargers and airplane parts reported said its net income jumped to $459 million, or 56 cents a share, from $50 million, or 6 cents a share during the same period last year.

Analysts on Wall Street were expecting Honeywell to earn 55 cents a share, according to Thomson Financial/ First Call.

Honeywell said its second-quarter sales declined 7 percent to $5.7 billion.

Sales grew in Defense & Space, Transportation Products and Security and Fire Solutions. Sales growth was more than offset by lower sales primarily in Commercial Aerospace and Advanced Circuits, as well as the disposition of the Commercial Vehicle Braking Systems, Pharmaceutical Fine Chemicals and Consumer Products (portable air cleaners, fans) businesses.

Dave Cote, chairman and chief executive officer said, "Honeywell's portfolio diversity and our aggressive ongoing operational and productivity improvements enabled us to meet our earnings target and generate record free cash flow.

"While sales were down on a year-over-year basis, all of our segments experienced sequential sales and income increases compared to the first quarter of this year," he said.

"The incomes of our Automation and Controls, Specialty Materials and Transportation Products segments together grew 25 percent," Cote said.

"Although our aerospace segment still faces a tough economic environment, its sales grew 6 percent and income jumped 19 percent on a sequential basis," Cote said.

"We are continuing to strengthen our ability to generate cash, with every business now implementing initiatives to achieve breakthrough improvement in working capital turnover," Cote said.

"Honeywell has a great opportunity to deliver more cash and we're making this a daily focus across the company," he added.

Earnings rise at United Technologies

HARTFORD, Conn., July 17 (UPI) -- United Technologies Corp. said its second-quarter net income rose on stronger performance at its Otis elevator division.

The maker of Sikorsky helicopters, Otis elevators and Carrier air conditioners said its second-quarter net income rose to $624 million, or $1.23 a diluted share, from $588 million, or $1.16 a diluted share during the same period last year.

The results reflect adoption of new accounting standards that exclude goodwill amortization costs.

The company also raised its full-year earnings forecast to $4.40 a share.

For the quarter analysts on Wall Street were expecting United Technologies to earn $1.20 a share, according to Thomson Financial/First Call.

United Technologies said its consolidated revenues for the second quarter were $7.3 billion, level with last year.

George David, chairman and chief executive officer, said, "Our solid earnings and cash flow in the quarter confirm UTC's longtime commitment and record of performing in challenging economies and market conditions.

"We do this the way we always have, with relentless focus on operating effectiveness. We were particularly pleased with Carrier's increased margin in the quarter, on reduced volume and in tough market conditions. We see lots of room to continue this UTC record and, based on first-half performance and current business outlooks, are raising our outlook for the year to $4.40 in earnings per share. Our available cash flow expectation remains as we have said before at about $2 billion for the year," David said.

The company said second-quarter operating profit at Otis unit increased 14 percent on 9 percent higher revenues, with about half the revenue growth due to acquisitions.

Operating profit increased in all regions, except South America, reflecting productivity improvements and revenue growth. Otis' new equipment orders increased more than 20 percent in the quarter, about half organically.

At Carrier, operating profit in the quarter was level with last year on 3 percent lower revenues. Margin increased to 13.2 percent, a 30 basis point improvement, as a result of savings from previous restructuring and other cost reductions, which more than offset the impact of lower volume and the absence of a purchasing related settlement in the prior year.

Carrier revenues grew in Asia and in the transport refrigeration sector, but continued to be weak in some markets, particularly North American Commercial HVAC and Latin America.

Pratt & Whitney's operating profit was 7 percent below last year on 4 percent lower revenues. Higher military engine volume partially offset lower small-engine shipments, commercial spares and power systems shipments. Commercial spares orders exceeded UTC expectations, down less than 10 percent from a year ago.

Operating profit for the Flight Systems segment was 6 percent lower than last year on 3 percent higher revenues. At Hamilton Sundstrand, cost reduction partially offset lower aftermarket volume; at Sikorsky, aftermarket volume offset lower helicopter shipments.

General Dynamics posts higher results

FALLS CHURCH, Va., July 17 (UPI) -- General Dynamics Corp., a maker of nuclear submarines, tanks, and destroyers, said its second-quarter net income rose on strong growth in sales of its combat systems and information technology.

The defense contractor said its second quarter net income rose to $263 million, or $1.29 a share, from $227 million, or $1.12 a share during the same period last year.

Sales jumped to $3.51 billion from $2.96 billion a year ago.

Analysts on Wall Street were expecting General Dynamics to earn $1.27 a share, according to Thomson Financial/First Call.

Nicholas D. Chabraja, chairman and chief executive officer, said, "This was another solid quarter, paced by especially good performance in our Information Systems and Technology group as well as in the Combat Systems group.

"At the mid-year mark, we remain on course with respect to our prior guidance for the year," Chabraja said.

"We ended the first half of the year with a funded backlog of $20.5 billion, and a total backlog of $25.5 billion," he added.

Coca-Cola posts higher results

ATLANTA, July 17 (UPI) -- Coca-Cola Co. said its second-quarter net income rose due in part to the roll out of new soft drinks and a solid performance in the all-important North American market.

The world's largest soft drink company said its second-quarter net income climbed to $1.29 billion, or 52 cents a share, from $1.12 billion, or 45 cents a share during the same period last year.

Revenue soared to $5.37 billion from $4.65 billion a year ago.

Analysts on Wall Street had expected the soft drink giant to post a net income of 52 cents a share, according to Thomson Financial/First Call.

The second-quarter results were unaffected by the soft drink maker's decision on Sunday to begin to expense the cost of its stock options. The accounting change, which becomes effective in the fourth quarter, will cut about a penny a share from the company's earnings in 2002 and about 3 cents a share in 2003.

The latest results included a 2-cent a share drop because of currency impact.

The beverage giant reported worldwide unit case volume rose 5 percent in the second quarter. The year-to-date growth was bolstered by results from the company's carbonated soft drink category, which grew more than 2 percent.

"These results are satisfactory, especially in light of the current economic climate," said Chairman and Chief Executive Doug Daft.

Coca-Cola said it expects the difficult economic environment to continue in many regions, but still remains comfortable with analysts' earnings estimates for the year.

Analysts are expecting a mean estimate of $1.78, according to Thomson Financial/First Call.

Coca-Cola earned $3.97 billion, or $1.60 a share, on revenue of $20.1 billion in 2001.

Last year's earnings included 8 cents a share of incremental marketing investments and a negative currency impact of about 6 cents a share.

The company also maintained its year volume outlook. Unit-case volume is a measure of financial health and growth in the beverage industry.

In 2001, the company reported international volume growth of 5 percent and worldwide volume growth of 4 percent.

In North America, Coca-Cola reported volume growth of 4 percent in the second quarter and year-to-date, led by strong growth in carbonated and non-carbonated beverages.

Coke's recent purchase of Diageo PLC's Seagram line of mixers as well as two deals with European water brands had "minimal impact" on the company's second-quarter volume and earnings.

The recently announced deals with Evian and Danone water brands should boost results starting in the third quarter, Coke said.

In June, Coke and Groupe Danone confirmed they formed a partnership to produce, market and distribute Groupe Danone's retail bottled spring and source water products in the U.S. In April, Coke and Danone agreed to put Coke in charge of marketing, sales and distribution of Danone's biggest water brand, Evian.

In Latin America, unit case volume increased 1 percent in the quarter and slightly in the first six months, reflecting strong performance in Northern Latin America offset by challenging economic conditions, primarily in Argentina and Venezuela.

Unit case volume rose 3 percent in the quarter in the Europe, Eurasia and Middle East regions.

Results were driven by "solid performance" across the area, including Western Europe, Spain, Turkey and Russia.

In Asia, the company reported unit case growth of 14 percent for the latest quarter, driven by strong performance of the company's business in key markets including Japan, China, India and the Philippines.

The Africa region produced volume growth of 7 percent in the second quarter, with carbonated soft drink brands leading the rise.