Reported net earnings up 8.3% to $2.0 billion and reported diluted earnings per share up 13.9% to $0.90.
  • Underlying net earnings up 7.5% to $2.0 billion and underlying diluted earnings per share up 13.0% to $0.87.
  • Underlying operating companies income up 5.8% to $3.8 billion. Excluding an unfavorable currency impact of $219 million, underlying operating companies income would have been up 11.9%.

Full-Year 2000 Highlights:

  • Reported net earnings up 10.9% to $8.5 billion and reported diluted earnings per share up 17.6% to $3.75.
  • Underlying net earnings up 6.3% to $8.4 billion and underlying diluted earnings per share up 12.4% to $3.71, in line with the company's forecast.
  • Underlying operating companies income up 5.9% to $16.0 billion. Excluding an unfavorable currency impact of $495 million, underlying operating companies income would have been up 9.2%.
  • Raised dividend 10.4% to an annualized rate of $2.12 per common share.
  • Repurchased 138 million common shares at a cost of $3.6 billion.
  • Completed acquisition of Nabisco in December for an aggregate cost of $19.2 billion, including the assumption of approximately $4.0 billion of existing Nabisco debt.

Due to the timing of the acquisition, Nabisco 2000 operating results are not included in Philip Morris fourth quarter and year-end income statements, as the effects of such inclusion would have been immaterial.

The comparison of underlying results to reported results exclude or include certain 2000 and 1999 pre-tax items that are described in detail on the last page of this release.

Philip Morris Reports 2000 Results Meets Full-Year Target of $3.71 for Underlying Diluted Earnings Per Share

Fourth-Quarter 2000:

Reported Net Earnings Up 8.3% Underlying Net Earnings Up 7.5%

Reported Diluted E.P.S. Up 13.9% to $0.90 per Share

Underlying Diluted E.P.S. Up 13.0% to $0.87 per Share

Full-Year 2000:

Reported Net Earnings Up 10.9% Underlying Net Earnings Up 6.3%

Reported Diluted E.P.S. Up 17.6% to $3.75 per Share

Underlying Diluted E.P.S. Up 12.4% to $3.71 per Share

Philip Morris Companies Inc. (NYSE: MO) announced yesterday that full-year 2000 underlying net earnings increased 6.3% to $8.4 billion, and underlying diluted earnings per share rose 12.4% to $3.71 per share, meeting the company's previously announced earnings target.

"Philip Morris continued its program of strategic growth and generated strong results in 2000," said Geoffrey C. Bible, chairman of the board and chief executive officer. "We are thrilled that Nabisco's talented employees and superb portfolio of brands have joined the Kraft family.

"We continued to deliver on our promise to grow our businesses with steadily improving results throughout the year, despite the impact of $495 million in unfavorable currency on our international businesses. Our domestic tobacco business outperformed the industry in volume growth and delivered solid gains in income. Our international tobacco business increased volume and income, and gained share in most of its important markets. New products continued to drive the growth of both our North American and international food businesses, generating strong gains in volume, income and margins. In beer, we increased underlying operating companies income despite a decline in domestic shipment volume.

"For the full year 2001, underlying diluted earnings per share are projected to grow in the range of 9% to 11%, which includes the previously disclosed dilutive impact of the Nabisco acquisition. Cash earnings per share, which is earnings per share excluding the impact of goodwill amortization, is expected to grow in the range of 13% to 15%. The strength of the U.S. dollar versus foreign currencies represents a continuing risk to these projections," Bible said.

During 2000, Philip Morris raised its quarterly dividend 10.4% to an annualized rate of $2.12 per common share. In addition, the company repurchased 138 million shares of its common stock at a cost of $3.6 billion, reflecting 5.9% of the company's outstanding shares.

The company currently expects to file a registration statement with the Securities and Exchange Commission (SEC) for the planned initial public offering (IPO) of its global food business by the end of the first quarter. Due to SEC regulations, the company will not comment further about the IPO prior to the filing.

Fourth-Quarter 2000 Results

For the fourth quarter, on a reported basis, operating revenues were $19.4 billion; operating companies income increased 6.0% to $3.9 billion; net earnings rose 8.3% to $2.0 billion; and diluted earnings per share rose 13.9% to $0.90.

On an underlying basis, operating revenues increased 1.6% to $19.4 billion; operating companies income increased 5.8% to $3.8 billion; net earnings rose 7.5% to $2.0 billion; and diluted earnings per share rose 13.0% to $0.87. Excluding an unfavorable currency impact of $219 million, underlying operating companies income would have been up 11.9%.

Full-Year 2000 Results

For the full year, on a reported basis, operating revenues increased 2.2% to $80.4 billion; operating companies income increased 9.5% to $16.2 billion; net earnings rose 10.9% to $8.5 billion; and diluted earnings per share rose 17.6% to $3.75. Full-year reported results exclude $99 million of operating companies income in the first quarter related to the century date change, which boosted fourth-quarter 1999 income by the corresponding amount; include a pre-tax gain of $139 million in the third quarter from the sale of the company's confectionery business in France; and include a pre-tax gain of $100 million in the fourth quarter from a transaction under which Miller sold the U.S. rights for Molson beer.

On an underlying basis, operating revenues increased 3.2% to $80.3 billion; operating companies income increased 5.9% to $16.0 billion; net earnings rose 6.3% to $8.4 billion; and diluted earnings per share rose 12.4% to $3.71. Excluding an unfavorable currency impact of $495 million, underlying operating companies income would have been up 9.2%.

NABISCO ACQUISITION

In December 2000, Philip Morris completed its acquisition of Nabisco Holdings Corp. for an aggregate cost of $19.2 billion, including the assumption of approximately $4.0 billion of existing Nabisco debt. Due to the timing of the acquisition, Nabisco 2000 financial results are not included in Philip Morris fourth quarter and year-end income statements, as the effects of such inclusion would have been immaterial. However, Philip Morris' interest expense includes the interest on borrowings to fund the acquisition.

A brief summary of Nabisco's full-year results is provided below for reference.

Full-Year 2000 Results

Nabisco's reported operating companies income decreased 18.6% to $884 million. However, these results reflect one-time costs arising from the acquisition, including a $139 million pre-tax loss on businesses sold in order to comply with Federal Trade Commission requirements for the acquisition and pre-tax charges of $127 million for transaction and employee costs.

Underlying operating companies income, which excludes the one-time costs noted above, as well as full-year earnings results of businesses sold during the year, was up 12.8% to $1.1 billion. The businesses sold in December 2000 generated annual operating revenues and operating companies income of approximately $300 million and $100 million, respectively.

Nabisco's base business turned in a solid performance. Underlying U.S. volume grew by 21.7% in 2000, with gains across all categories. Excluding the impact of the first full year of Favorite Brands, a non-chocolate confectionery business acquired in 1999, underlying U.S. volume was up 2.2% on solid gains in biscuits, Life Savers confectioneries, specialty products and foodservice shipments. Nabisco's share of the U.S. biscuit category increased on strong cookie sales.

Underlying volume grew 1.0% in Nabisco's international business on solid gains in Canada, Puerto Rico, Venezuela, Argentina (reflecting an acquisition made in the third quarter of 1999) and China, partially offset by volume declines in Mexico and Brazil.

Kraft is integrating Nabisco into its worldwide operations, adding well-known brands to its portfolio such as Nabisco, Oreo, ChipsAhoy!, Newtons, Nilla, Nutter Butter, SnackWell's, Ritz, Premium, Triscuits, Wheat Thins, Cheese Nips, Life Savers, Planters, Cream of Wheat, A.1., Grey Poupon, Terrabusi and Club Social.

Unless otherwise specified, the following review of the company's performance refers to 2000 underlying operating results and volumes compared with those for 1999. As detailed on the last page of this release, underlying operating companies income excludes the impact of certain 2000 and 1999 pre-tax items as well as the results from operations divested since the beginning of 1999.

DOMESTIC TOBACCO

Fourth-Quarter 2000 Results

In the fourth quarter, underlying operating companies income for Philip Morris Incorporated (PM USA), the company's domestic tobacco business, increased 5.0% to $1.5 billion and volume declined 1.8% to 51.4 billion units, primarily as a result of wholesaler inventory reductions following a fourth-quarter price increase and one less shipping day. Shipment share was essentially even at 50.0%, due to wholesaler inventory reductions and a high level of competitive promotional activity in the market, which distorted shipment comparisons. However, according to consumer purchase data from Information Resources Inc./Capstone, PM USA's share of cigarettes sold at retail was up 0.8 points to 50.3% in the fourth quarter, indicating continued positive momentum.

The premium segment share of total industry shipments was down 0.4 points to 73.2%, reflecting the above-mentioned trade inventory distortions. At retail, the premium segment increased 0.3 points to 73.5%. Marlboro volume declined 0.5%, but its share was up 0.4 points to 37.5%. Importantly, Marlboro's retail share was up 1.5 points to 37.0% in the quarter.

Full-Year 2000 Results

For the full year, underlying operating companies income for PM USA increased 6.0% to $5.4 billion, due largely to higher pricing and increased volume.

In 2000, PM USA's shipment volume outperformed the industry, rising 1.8% to 211.9 billion units, compared to an increase in industry volume of 0.1% to a total of 419.8 billion units. However, after adjusting for trade inventories and other factors, PM USA estimates that industry volume declined by 1% to 2%. PM USA shipment share reached a record 50.5%, up 0.9 points. Retail share increased 0.6 points to a record 50.5% for the year.

For the year, volume increased 0.2% for the industry's premium segment, and the segment's share grew 0.1 points to 73.5% of total shipments. PM USA's share of this segment rose 1.1 points to 60.6%.

Marlboro volume increased 3.5% for the year, and Marlboro achieved another record shipment share of 37.7%, up 1.3 points. Marlboro retail share rose 1.1 points for the year, to 37.1%. Marlboro Milds, introduced nationally at retail in April, further strengthening the Marlboro Menthol family, achieved a shipment share of 0.5%, making Marlboro Menthol the fastest-growing menthol brand in the U.S.

As a group, PM USA's other premium brands, which include Virginia Slims, Benson & Hedges, Merit and Parliament accounted for 6.8% of industry shipments, down 0.5 points from 1999, but Parliament increased its share slightly, and Virginia Slims maintained its share.

Basic's share of industry shipments was up 0.3 points to 5.2%. Basic's share of the declining discount segment was up 1.1 points to 19.4%, helping PM USA increase its share of this segment by 0.1 points to 22.5%.

INTERNATIONAL TOBACCO

Fourth-Quarter 2000 Results

During the fourth quarter, underlying operating companies income for Philip Morris International (PMI), the company's international tobacco business, increased 4.5% to $1.0 billion due to higher volume. Excluding an unfavorable currency impact of $170 million for the quarter, PMI operating companies income grew 21.7%. Underlying volume increased a strong 5.4% to 151.1 billion units, driven primarily by a solid performance in Western Europe and recovery in Russia and the rest of Eastern Europe and Asia.

Full-Year 2000 Results

For the full year, underlying operating companies income for PMI increased 4.5% to $5.3 billion. Excluding an unfavorable currency impact of $404 million, PMI operating companies income grew 12.5% for the year.

PMI shipment volume recovered in 2000 from the decline experienced in 1999, rising 1.1%, to 675.4 billion units with strong volume increases in Western and Eastern Europe and Asia.

For the year, PMI gained or maintained share in most of its major markets and achieved at least a one share point gain in the following markets: Belgium, France, Indonesia, Italy, Japan, Korea, Malaysia, Mexico, the Netherlands, Poland, Portugal, Russia, Saudi Arabia, Singapore, Spain and Thailand.

Marlboro international volume for the full year was up 1.7%, driven by strong growth momentum in Brazil, France, Greece, Indonesia, Italy, Japan, Korea, Malaysia, Mexico, Russia, Saudi Arabia, Spain and Thailand.

Volume increased 3.6% for L&M, the third-largest international cigarette brand, driven primarily by gains in Eastern Europe and Asia.

In Western Europe, volume was up 4.3%, with solid gains in Spain, Italy and France, as well as Portugal, Greece and the Benelux countries, offset by lower volume in Germany, reflecting a lower industry share amid heightened competition. Marlboro performed well in the region with volume up 3.9% and share reaching a record 24.1%. Chesterfield also showed solid volume increases, with continued strong growth in Spain.

In Asia, overall volume increased 7.3%. In Japan, share increased 1.1 points to a record 21.4%, driven by the outstanding performance of Marlboro, the fastest-growing brand in the country, where its share grew 1.2 points to 7.0%. Elsewhere in Asia, significant volume growth was fueled by Marlboro in Indonesia, Malaysia, Korea and Thailand. L&M also drove a very strong volume increase in Thailand and Malaysia.

In Eastern Europe, volume increased 5.8% due to strong gains in Russia, Ukraine and Kazakhstan. Parliament and Bond Street volume was up due to good performances in the region, while Virginia Slims showed solid gains in Russia.

In Central Europe, the Middle East and Africa, overall volume declined 0.7%. In Poland, volume was down due primarily to trade inventory distortions, but share was up for the year. In the Czech Republic, volume was down due to market softness and the timing of shipments. In the Middle East, volume was up due to higher Marlboro shipments in Saudi Arabia, as well as higher Marlboro volume in Egypt. Volume and share declined in Turkey due to a significant tax-driven price increase in December 1999, which affected the premium segment in particular.

In Latin America, volume was essentially flat. Excellent volume and share growth in Mexico, driven by Marlboro's performance, was offset by Argentina, where volume declined primarily due to tax-driven pricing in a recessionary environment, and in Brazil due to lower industry volume. Philip Morris brand cigarettes showed a volume increase in Argentina, where the brand captured downtrading from the premium segment following tax-driven price increases.

NORTH AMERICAN FOOD

Fourth-Quarter 2000 Results

In the fourth quarter, underlying operating companies income for Kraft Foods North America (KFNA) rose 8.5% to $751 million, driven by a strong 7.7% gain in volume, aided by an extra week of shipments in December, increased productivity savings and lower commodity costs.

Volume increased strongly for all of KFNA's businesses. Beverages, Desserts and Cereals volume was up 11.2%; Biscuits, Snacks and Confectionery was up 28.5%; Cheese, Meals and Enhancers was up 4.1%; and Oscar Mayer and Pizza was up 12.4%.

Full-Year 2000 Results

For the full year, underlying operating companies income for KFNA rose 7.8% to $3.6 billion for the year, driven by volume growth and productivity improvements. Overall, KFNA volume rose 3.8%, fueled by new product successes. KFNA's volume for the year benefited from an extra week of shipments in December, which was essentially offset by reductions in retail trade inventories.

Beverages, Desserts and Cereals registered strong volume growth of 9.5%, led by double-digit gains in Capri Sun and Tang pouch ready-to-drink beverages. The coffee business recorded volume and share growth with gains in Starbucks, which is sold under license to retail grocery stores. The premium Gevalia mail-order coffee business also contributed to volume growth. Overall performance in the desserts business was up, largely due to the first-quarter acquisition of Balance Bar nutrition/energy bars, as well as increased shipments of Cool Whip whipped toppings and Kraft Handi-Snacks ready-to-eat shelf stable desserts. Post cereal shipments declined in line with the overall trend in the ready-to-eat cereal category.

Biscuits, Snacks and Confectionery recorded a very strong volume gain of 19.4%, with double-digit growth in Altoids mints aided by the introduction of a new cinnamon flavor line extension. Terry's chocolates also recorded double-digit gains, led by strong holiday merchandising and the introduction of Terry's chocolate raspberry products.

Cheese, Meals and Enhancers volume, which includes Canada, Mexico and Puerto Rico, declined 0.3%. A gain of 1.7% in volume shipped to grocery customers in the U.S., Canada, Mexico and Puerto Rico was more than offset by a decline of 7.1% in the U.S. foodservice business, due to the expiration of an exclusive distribution agreement on Kraft brands and the loss of a national supply agreement.

Cheese volume increased with gains in several product lines, including Kraft Singles cheese slices, Kraft Natural cheese and Philadelphia snack bars. Breakstone cottage cheese and sour cream also posted volume gains. Meals volume was lower, reflecting a decline in shipments of Taco Bell Home Originals Mexican products and Minute rice. In enhancers, shipments declined slightly due to declines in barbecue sauce and seasoned coatings, which were partially offset by gains in Kraft mayonnaise and Kraft pourable salad dressings.

Oscar Mayer and Pizza continued to post strong growth, with volume up 5.9%. In the processed meats business, volume was higher, led by double-digit gains in Lunchables lunch combinations, which benefited from the introduction of Lunchables Mega Pack. Oscar Mayer also recorded volume gains in its hot dog and luncheon meats businesses and from the first-quarter acquisition of Boca Foods meat alternatives.

The frozen pizza business continued its track record of strong growth, as all three brands Tombstone, Jack's and Di Giorno registered volume gains, with Di Giorno aided by the success of Di Giorno Half and Half frozen pizza.

INTERNATIONAL FOOD

Fourth-Quarter 2000 Results

For the fourth quarter, underlying operating companies income for Kraft Foods International (KFI) increased 16.0% to $362 million, driven by volume gains of 9.3% with increases across all categories and the benefit of an extra week of shipments in December. Volume was up 7.4% in Europe, Middle East and Africa, and up 16.8% in Latin America and Asia Pacific.

Excluding an unfavorable currency impact of $49 million, KFI underlying operating companies income grew 31.7%. Underlying operating revenues declined 9.3%, due to $371 million in unfavorable currency.

Full-Year 2000 Results

For the full year, underlying operating companies income for KFI increased 5.4% to $1.1 billion, benefiting from higher volumes and the extra week of shipments in December. Excluding an unfavorable currency impact of $96 million, KFI operating companies income grew 15.1%. Higher underlying operating companies income was driven by volume growth of 4.8%, with gains across all categories benefiting from successful new product launches and strong growth in developing markets, as well as productivity savings. Underlying operating revenues declined 6.8%, due to $887 million in unfavorable currency.

In Europe, Middle East and Africa, volume grew 2.9% with gains across all categories driven by strong performances in developing markets, as well as solid gains in numerous established markets. In beverages, coffee performance benefited from strong growth in developing markets and solid gains in Austria, Italy, Sweden and the United Kingdom. Improved packaging, advertising and quality using a new aroma-protect process was implemented in Germany for our Jacobs Kronung brand. Snacks volume increased strongly, driven by successful new product launches and line extensions in confectionery, primarily the Milka chocolate brand in France and Germany, as well as Estrella and Maarud salty snacks in the Nordic area. Cheese volume grew strongly, benefiting from the favorable performance of Philadelphia cream cheese, Kraft Sottilette cheese in Italy, Dairylea cheese in the United Kingdom and El Caserio cheese in Spain. Convenient Meals volume increased, driven by the success of recently launched Dairylea Lunchables Fun Pack and Dairylea Lunchables Pizza in the United Kingdom. Higher grocery volume was driven by gains in Kraft mayonnaise in Italy and Spain.

In Latin America and Asia Pacific, volume grew 11.8% driven by strong gains across all categories. Higher volumes were reported in Australia, Brazil, the Caribbean, China, Indonesia, Japan, Korea and the Philippines. Beverages performed well, driven by Tang volume benefiting from new flavor introductions in Brazil, effective marketing programs in China and the Philippines, and expansion in Thailand. In coffee, volume benefited from higher exports to the Caribbean and gains in China from the successful relaunch of Maxwell House coffee mix. Snacks volume increased solidly, with higher confectionery sales driven by share gains in the Easter seasonal business in Brazil and Argentina, and the success of Sugus chewy candy in Indonesia and China. Cheese volume grew strongly driven by Philadelphia cream cheese in Australia and Japan, higher Kraft Eden cheese in the Philippines and Kraft cheese in Indonesia. Convenient Meals volume was higher, driven by higher exports of Kraft Macaroni and Cheese Dinners to Asian markets. Grocery volume increased, benefiting from higher Vegemite yeast spread sales in Australia.

BEER

Fourth-Quarter 2000 Results

Underlying operating companies income for Miller Brewing Company (Miller) declined 31.4% to $59 million in the fourth quarter, on a 9.5% decline in domestic underlying shipment volume and higher marketing. Volume was adversely impacted by a reduction in distributor inventories, higher retail pricing and lower industry shipments in the quarter.

Full-Year 2000 Results

For the full year, underlying operating companies income for Miller rose 5.4% to $543 million, due to higher pricing, especially on Miller Genuine Draft and Miller High Life. Contract brewing continued to provide incremental income in its second full year.

Domestic underlying shipment volume declined 2.6% to 40.6 million barrels due to reductions in distributor inventories and higher retail pricing. At retail, volume for Miller Lite, the company's flagship brand, was essentially flat. The company's other major domestic premium brands, Miller Genuine Draft, Miller High Life, Milwaukee's Best and Icehouse, recorded decreased volumes. Foster's continued to generate growth.

During the year, the company restructured agreements with Molson Inc. of Canada and Foster's of Australia. Miller sold its rights to the Molson business in the U.S. for a pre-tax gain of $100 million, while Foster's will continue to market and distribute its brands through Miller in the U.S.

FINANCIAL SERVICES

Underlying operating companies income for Philip Morris Capital Corporation (PMCC) rose 15.0% to $69 million for the fourth quarter and 14.9% to $262 million for the year. The increase was driven by growth in leasing and structured finance investments and by continued gains derived from PMCC's finance asset portfolio.

With 2000 underlying operating revenues of $80.3 billion ($88.5 billion including Nabisco), the Philip Morris family of companies is the world's largest producer and marketer of consumer packaged goods. Philip Morris Companies Inc. has five principal operating companies: Kraft Foods, Inc., Miller Brewing Company, Philip Morris International Inc., Philip Morris Incorporated (PM USA) and Philip Morris Capital Corporation.

For more information about Philip Morris Companies Inc., please visit the Company's Web site at: www.philipmorris.com. A complete copy of the Company's audited 2000 financial statements will be available through the Company's Web site after it is filed with the SEC on January 31, 2001. If you do not have Internet access but would like to receive a copy of Philip Morris' audited 2000 financial statements, please call toll-free (800) 367-5415 to request a copy.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The following important factors could cause actual results and outcomes to differ materially from those contained in such forward-looking statements.

The Company's consumer products subsidiaries are subject to intense competition, changes in consumer preferences and demand for their products, changing prices for raw materials and the effects of local economic conditions, foreign economies and currency movements. Their results are dependent upon their continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new products and markets and to broaden brand portfolios, in order to compete effectively with lower-priced products in a consolidating environment at the retail and manufacturing levels, and to improve productivity. The Company's tobacco subsidiaries continue to be subject to health concerns relating to the use of their products, including increasing marketing, regulatory and smoking restrictions; the effects on consumption rates of price increases related to concluded tobacco litigation settlements and excise tax increases; governmental investigations; and litigation, including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with the Company's understanding of applicable law, bonding requirements and the absence of appellate remedies to get timely relief from any of the foregoing; and other risks detailed from time to time in the Company's publicly-filed documents, including but not limited to its Annual Report on Form 10-K for the period ended December 31, 1999 and its quarterly report on Form 10-Q for the period ended September 30, 2000. There can be no assurance that the initial public offering of the Company's global food business will be consummated within a particular time frame. The Company cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statement.

                               PHILIP MORRIS COMPANIES INC.
                                    and Subsidiaries
                             Condensed Statements of Earnings
                             For the Years Ended December 31,
                           (in millions, except per share data)

                                       REPORTED
                            ---------------------------------

                                 2000      1999     % Change
                            ----------- ----------- ---------

Operating revenues           $  80,356   $  78,596     2.2 %

Cost of sales                   29,148      29,561    (1.4)%
Excise taxes on products        17,080      16,845     1.4 %
                            ----------- -----------

Gross profit                    34,128      32,190     6.0 %

Marketing, administration
   and research costs           18,139      16,860     7.6 %

Gain on sale of a French
   confectionery business         (139)          -
Gain on sale of beer rights       (100)
Int'l. tobacco Brazil
 capacity reduction and
 separation program                  -         136
Separation programs                  -         340
Beer asset impairment                -          29
                            ----------- -----------

Operating companies income      16,228      14,825     9.5 %


Amortization of goodwill           591         582
Minority interest                  127         126
General corporate expenses         831         627
Interest and other debt
 expense, net                      719         795
                            ----------- -----------

Earnings before income taxes    13,960      12,695    10.0 %

Provision for income taxes       5,450       5,020     8.6 %
                            ----------- -----------

Net earnings                 $   8,510  $    7,675    10.9 %
                            =========== ===========

Basic earnings per
 share(**)                   $    3.77  $     3.21    17.4 %
                            =========== ===========

Diluted earnings per
 share(**)                   $    3.75  $     3.19    17.6 %
                            =========== ===========

Weighted average number of
Shares outstanding  - Basic      2,260       2,393    (5.6)%
                    - Diluted    2,272       2,403    (5.5)%


                                       UNDERLYING ( * )
                            -------------------------------------

                                 2000      1999       % Change
                            ----------- -----------  ------------

Operating revenues            $ 80,316    $ 77,829     3.2 %

Operating companies income    $ 16,045    $ 15,144     5.9 %


Net earnings                   $ 8,427     $ 7,926     6.3 %                                                       ========= ============
                               =======     =======
Basic earnings per share(**)   $  3.73     $  3.31    12.7 %
                               =======     =======

Diluted earnings per share(**) $  3.71     $  3.30    12.4 %
                               =======     =======

Weighted average number of
  Shares outstanding
           - Basic               2,260       2,393    (5.6)%
           - Diluted             2,272       2,403    (5.5)%

    (*) See notes on last page.

   (**) Basic and Diluted earnings per share are computed for each of
        the periods presented. Accordingly, the sum of the quarterly
        earnings per share amounts may not agree to the year-to-date
        amounts.


                        PHILIP MORRIS COMPANIES INC.
                              and Subsidiaries
                  Selected Financial Data by Business Segment
                       For the Years ended December  31,
                                (in millions)

OPERATING REVENUES                         REPORTED
----------------------------------------------------------------------
                                2000        1999      % Change
                               -------------------------------

Domestic tobacco              $ 22,658    $ 19,596    15.6 %
International tobacco           26,503      27,377    (3.2)%
Incremental Year 2000
 business                         (129)        129
                               -------    --------
  International tobacco total   26,374      27,506    (4.1)%
                               -------    --------
North American food             18,532      17,826     4.0 %
Incremental Year 2000 business     (71)         71
                               -------    --------
  North American food total     18,461      17,897     3.2 %
                               -------    --------
 International food              8,097       8,874    (8.8)%
  Incremental Year 2000
   business                        (26)         26
                               -------    --------
  International food total       8,071       8,900    (9.3)%
                               -------    --------
Beer                             4,375       4,342     0.8 %
Financial services                 417         355    17.5 %
                               -------    --------
 Total operating revenues     $ 80,356    $ 78,596     2.2 %
                               =======    ========





OPERATING COMPANIES INCOME            REPORTED
----------------------------------------------------------------------
                                 2000        1999     % Change
                               -------------------------------

Domestic tobacco               $ 5,350     $ 5,048     6.0 %
Separation programs                  -        (183)
                               -------    --------
  Domestic tobacco total         5,350       4,865    10.0 %
                               -------    --------
International tobacco            5,270       5,045     4.5 %
Incremental Year 2000 business     (59)         59
Int'l tobacco Brazil capacity
 reduction and separation
 program                             -        (136)
                               -------    --------
  International tobacco total    5,211       4,968     4.9 %
                               -------    --------
North American food              3,574       3,320     7.7 %
Separation programs                  -        (157)
Incremental Year 2000 business     (27)         27
                               -------    --------
  North American food total      3,547       3,190    11.2 %
                               -------    --------
International food               1,082       1,050     3.0 %
Gain on sale of a French
 confectionery business            139
Incremental Year 2000 business     (13)         13
                               -------    --------
  International food total       1,208       1,063    13.6 %
                               -------    --------
Beer                               550         540     1.9 %
Gain on sale of beer rights        100           -
 Beer asset impairment               -         (29)
                               -------    --------
  Beer total                       650         511    27.2 %
                               -------    --------
Financial services                 262         228    14.9 %
                               -------    --------
 Total operating companies
  income                      $ 16,228    $ 14,825     9.5 %
                               =======    ========

OPERATING REVENUES                   UNDERLYING ( * )
----------------------------------------------------------------------
                                 2000        1999     % Change
                                 -----------------------------

Domestic tobacco              $ 22,658    $ 19,596    15.6 %
International tobacco           26,503      27,377    (3.2)%
Incremental Year 2000 business       -           -
                               -------    --------
  International tobacco total   26,503      27,377    (3.2)%
                               -------    --------
North American food             18,522      17,801     4.1 %
Incremental Year 2000 business       -           -
                               -------    --------
  North American food total     18,522      17,801     4.1 %
                               -------    --------
International food               7,966       8,547    (6.8)%
Incremental Year 2000 business       -           -
                               -------    --------
  International food total       7,966       8,547    (6.8)%
                               -------    --------
Beer                             4,250       4,153     2.3 %
                               -------    --------
Financial services                 417         355    17.5 %
                               -------    --------
  Total operating revenues    $ 80,316    $ 77,829     3.2 %
                               =======    ========



OPERATING COMPANIES INCOME           UNDERLYING ( * )
----------------------------------------------------------------------
                                 2000        1999     % Change
                                 -----------------------------

Domestic tobacco               $ 5,350     $ 5,048     6.0 %
Separation programs                  -           -
                               -------    --------
 Domestic tobacco total          5,350       5,048     6.0 %
                               -------    --------
International tobacco            5,270       5,045     4.5 %
Incremental Year 2000 business       -           -
Int'l tobacco Brazil capacity
 reduction and separation program    -           -
                               -------    --------
  International tobacco total    5,270       5,045     4.5 %
                               -------    --------

North American food              3,570       3,312     7.8 %
Separation programs                  -           -
Incremental Year 2000 business       -           -
                               -------    --------
  North American food total      3,570       3,312     7.8 %
                               -------    --------
International food               1,050         996     5.4 %
Gain on sale of a French
 confectionery business
Incremental Year 2000 business       -           -
                               -------    --------
  International food total       1,050         996     5.4 %
                               -------    --------

Beer                               543         515     5.4 %
Gain on sale of beer rights          -           -
Beer asset impairment                -           -
                               -------    --------
  Beer total                       543         515     5.4 %
                               -------    --------
Financial services                 262         228    14.9 %
                               -------    --------
  Total operating companies
   income                     $ 16,045    $ 15,144     5.9 %
                               =======    ========

( * ) See notes on last page.


                               PHILIP MORRIS COMPANIES INC.
                                     and Subsidiaries
                             Condensed Statements of Earnings
                            For the Quarters Ended December 31,
                           (in millions, except per share data)

                                           REPORTED
                               --------------------------------

                                 2000        1999     % Change
                                ------      ------    ---------

Operating revenues          $   19,414   $  19,411       - %


Cost of sales                    7,057       7,363    (4.2)%
Excise taxes on products         3,908       3,853     1.4 %
                               -------    --------

Gross profit                     8,449       8,195     3.1 %

Marketing, administration
 and research costs              4,675       4,510     3.7 %
Gain on sale of a French
 confectionery business              -           -
Gain on sale of
 beer rights                      (100)          -
Int'l. tobacco Brazil capacity
 reduction and separation program    -           -
Separation programs                  -           -
Beer asset impairment                -          29
                               -------    --------

Operating companies income       3,874       3,656     6.0 %

Amortization of goodwill           149         148
Minority interest                   35          31
General corporate expenses         205         241
Interest and other debt
  expense, net                     183         168
                               -------    --------

Earnings before income taxes     3,302       3,068     7.6%

Provision for income taxes       1,291       1,211     6.6%
                               -------    --------

Net earnings                 $   2,011   $   1,857     8.3%
                               =======    ========

Basic earnings per
 share (**)                  $    0.91   $    0.79    15.2%
                               =======    ========

Diluted earnings per
 share (**)                  $    0.90   $    0.79    13.9%
                               =======    ========
Weighted average number
 of Shares outstanding
 - Basic                         2,213       2,354    (6.0)%
 - Diluted                       2,235       2,359    (5.3)%


                                        UNDERLYING (*)
                               --------------------------------
                                 2000        1999     % Change
                                ------      -------   --------

Operating revenues          $   19,387  $   19,080     1.6%


Operating companies income  $    3,773  $    3,566     5.8%


Net earnings                 $   1,950  $    1,814     7.5%
                               =======    ========

Basic earnings per
  share(**)                  $    0.88  $     0.77    14.3%
                               =======    ========

Diluted earnings per
 share (**)                  $    0.87  $     0.77    13.0%
                               =======    ========
Weighted average number
 of Shares outstanding
 - Basic                         2,213       2,354    (6.0)%
 - Diluted                       2,235       2,359    (5.3)%



    (*) See notes on last page.

   (**) Basic and Diluted earnings per share are computed for each of
        the periods presented. Accordingly, the sum of the quarterly
        earnings per share amounts may not agree to the year-to-date
        amounts.


                        PHILIP MORRIS COMPANIES INC.
                              and Subsidiaries
                  Selected Financial Data by Business Segment
                      For the Quarters Ended December 31,
                               (in millions)



OPERATING REVENUES                        REPORTED
----------------------------------------------------------------------
                                 2000        1999     % Change
                                 -----------------------------

Domestic tobacco               $ 5,671     $ 5,244     8.1 %
International tobacco            5,822       5,958    (2.3)%
Incremental Year 2000
  business                           -         129
                               -------    --------
 International tobacco total     5,822       6,087    (4.4)%
                               -------    --------
North American food              4,639       4,370     6.2 %
Incremental Year 2000 business       -          71
                               -------    --------
 North American food total       4,639       4,441     4.5 %
                               -------    --------
International food               2,244       2,536   (11.5)%
Incremental Year 2000 business       -          26
                               -------    --------
 International food total        2,244       2,562   (12.4)%
                               -------    --------
Beer                               926         981    (5.6)%
Financial services                 112          96    16.7 %
                               -------    --------
 Total operating revenues     $ 19,414    $ 19,411       - %
                               =======    ========


OPERATING COMPANIES INCOME               REPORTED
----------------------------------------------------------------------
                                 2000        1999     % Change
                                 -----------------------------

Domestic tobacco               $ 1,501     $ 1,429     5.0 %
Separation programs                  -           -
                               -------    --------
 Domestic tobacco total          1,501       1,429     5.0 %
                               -------    --------
International tobacco            1,031         987     4.5 %
Incremental Year 2000 business       -          59
Int'l tobacco Brazil capacity
  reduction and separation
  program                            -           -
                               -------    --------
 International tobacco total     1,031       1,046    (1.4)%
                               -------    --------
North American food                751         694     8.2 %
Separation programs                  -           -
Incremental Year 2000 business       -          27
                               -------    --------
 North American food total         751         721     4.2 %
                               -------    --------
International food                 363         329    10.3 %
Gain on sale of a
 French confectionery business       -
Incremental Year 2000 business       -          14
                               -------    --------
 International food total          363         343     5.8 %
                               -------    --------
Beer                                59          86   (31.4)%
Gain on sale of beer rights        100           -
Beer asset impairment                -         (29)
                               -------    --------
  Beer total                       159          57   100.0+ %
                               -------    --------
Financial services                  69          60    15.0 %
                               -------    --------
 Total operating companies
 income                        $ 3,874     $ 3,656     6.0 %
                               =======    ========


OPERATING REVENUES                       UNDERLYING ( * )
----------------------------------------------------------------------
                                 2000        1999      % Change
                                 ------------------------------

Domestic tobacco               $ 5,671     $ 5,244     8.1 %
International tobacco            5,822       5,958    (2.3)%
Incremental Year 2000 business       -           -
                               -------    --------
 International tobacco total     5,822       5,958    (2.3)%
                               -------    --------
North American food              4,639       4,362     6.4 %
                               -------    --------
Incremental Year 2000 business       -           -
                               -------    --------
 North American food total       4,639       4,362     6.4 %
                               -------    --------
International food               2,243       2,472    (9.3)%
                               -------    --------
 Incremental Year 2000
  business                           -           -
                               -------    --------
 International food total        2,243       2,472    (9.3)%
                               -------    --------
Beer                               900         948    (5.1)%
Financial services                 112          96    16.7 %
                               -------    --------
  Total operating revenues    $ 19,387    $ 19,080     1.6 %
                               =======    ========

OPERATING COMPANIES INCOME              UNDERLYING ( * )
----------------------------------------------------------------------
                                 2000        1999     % Change
                                 -----------------------------

Domestic tobacco               $ 1,501     $ 1,429     5.0 %
Separation programs                  -           -
                               -------    --------
  Domestic tobacco total         1,501       1,429     5.0 %
                               -------    --------
International tobacco            1,031         987     4.5 %
Incremental Year 2000 business       -           -
Int'l tobacco Brazil capacity
 reduction and separation program    -           -
                               -------    --------
  International tobacco total    1,031         987     4.5 %
                               -------    --------
North American food                751         692     8.5 %
Separation programs                  -           -
Incremental Year 2000 business       -           -
                               -------    --------
  North American food total        751         692     8.5 %
                               -------    --------
International food                 362         312    16.0 %
Gain on sale of a French
 confectionery business
Incremental Year 2000 business       -           -
                               -------    --------
  International food total         362         312    16.0 %
                               -------    --------
Beer                                59          86   (31.4)%
Gain on sale of
 beer rights                         -           -
Beer asset impairment                -           -
                               -------    --------
  Beer total                        59          86   (31.4)%
                               -------    --------
Financial services                  69          60    15.0 %
                               -------    --------
  Total operating companies
   income                      $ 3,773     $ 3,566     5.8 %
                               =======    ========
( * ) See notes on last page.


                     PHILIP MORRIS COMPANIES INC.
                           and Subsidiaries
                       Condensed Balance Sheets
                       ------------------------
                     (in millions, except ratios)



                                          December 31,   December 31,
                                             2000            1999
                                         --------------- -------------
    Assets

Cash and cash equivalents                    $ 937         $ 5,100

All other current assets                    16,301          15,795

Property, plant and equipment, net          15,303          12,271

Goodwill and other intangible assets, net   33,090          16,879

Other assets                                 5,034           3,625
                                          ---------   -------------

   Total consumer products assets           70,665          53,670

   Total financial services assets           8,402           7,711
                                          ---------   -------------


      Total assets                        $ 79,067        $ 61,381
                                          =========   =============


    Liabilities and Stockholders' Equity

Accrued settlement charges                 $ 2,724         $ 2,320

All other current liabilities               23,225          15,697

Long-term debt                              18,255          11,280

Other long-term liabilities                 12,431          10,673
                                          ---------   -------------

   Total consumer products liabilities      56,635          39,970

   Total financial services liabilities      7,427           6,106
                                          ---------   -------------

    Total liabilities                       64,062          46,076

      Total stockholders' equity            15,005          15,305
                                          ---------   -------------

      Total liabilities and
         stockholders' equity             $ 79,067        $ 61,381
                                          =========   =============

Total consumer products debt              $ 27,196        $ 13,522

Debt/equity ratio - consumer products         1.81            0.88

Total debt                                $ 29,122        $ 14,468

Total debt/equity ratio                       1.94            0.95



                        PHILIP MORRIS COMPANIES INC.
                             and Subsidiaries
 Notes to Condensed Statements of Earnings and Selected Financial Data
                             (in millions)


    The following pre-tax items impacted underlying results in 2000
and 1999:


                                     Fourth  Fourth    Twelve   Twelve
                                     Quarter Quarter   Months   Months
                                      2000    1999      2000     1999
                                      ----    ----      ----     ----
  - Gain on sale of
      beer rights                   $(100)   $        $ (100)  $    -
  - Gain on the sale
      of a French confectionery
      business                        -          -      (139)       -

  - Related primarily to
      employee separation programs
              Domestic tobacco        -          -         -      183
              North American food     -          -         -      157

    - Related to incremental
       Year 2000 business:(a)
              International tobacco   -        (59)       59      (59)
              North American food     -        (27)       27      (27)
              International food      -        (13)       13      (13)
                                      -
  - Related to beer
     asset impairments                -         29         -       29

  - Related to international
     tobacco Brazil capacity
     reduction and employee
     separation program               -                    -      136
                                    -----     -----     -----    ----
                                   $(100)    $ (70)    $(140)    $406
                                   ======    ======    ======    ====


(a) Relates to sales of products that would normally have occurred in
    January 2000, but were made in 1999 in order for the Company's
    customers to avoid potential problems related to the Century Date
    Change. These sales were previously excluded from the underlying
    1999 fourth quarter results.

    In addition, operating results of businesses sold since the
    beginning of 1999 are excluded from underlying operating revenues
    and operating companies income (but not from underlying net
    earnings or earnings per share). Several international food,
    domestic food, and beer operations were divested since the
    beginning of 1999. No assumptions were made as to the application
    of proceeds from the sales of any operations.

    Restatement of North American food and international food results.
    Operating revenues and operating companies income for all periods
    presented were restated to reflect the transfer of management
    responsibility for Mexico and Puerto Rico from the international
    food business to the North American food business.
Link to Phillip Morris Website: www.philipmorris.com