Philip Morris Companies Inc. (NYSE: MO)

Reported Diluted E.P.S. Up 8.0% to $0.94 per Share

Underlying Diluted E.P.S. Up 6.7% to $0.95 per Share

Highlights:



  • Underlying operating companies income up 10.1% to $4.4 billion. Excluding an unfavorable currency impact of $106 million, underlying operating companies income would have been up 12.8%.



  • Underlying net earnings up 2.2% to $2.1 billion.



  • Underlying diluted earnings per share up 6.7% to $0.95.


Underlying results include the operating results of Nabisco in 2001, but not in 2000, and adjust for certain items as detailed on the last page of this release, including (1) a loss on the sale of a North American food factory, (2) approximately $100 million of operating companies income related to sales of products that would normally have occurred in January 2000, but were made in 1999 as the company’s customers planned for potential problems related to the century date change and (3) results from operations divested since the beginning of 2000.




  • Reported net earnings up 4.0% to $2.1 billion.


  • Reported diluted earnings per share up 8.0% to $0.94.

Reported results include the operating results of Nabisco in 2001, but not in 2000, and a $6 million after-tax cumulative effect of an accounting change to reflect the cost of adopting Financial Accounting Standards Board pronouncements applicable to accounting for derivative financial instruments.


PHILIP MORRIS REPORTS

2001 FIRST-QUARTER RESULTS

Reported Net Earnings Up 4.0%

Underlying Net Earnings Up 2.2%

Reported Diluted E.P.S. Up 8.0% to $0.94 per Share

Underlying Diluted E.P.S. Up 6.7% to $0.95 per Share

Philip Morris Companies Inc. (NYSE: MO) announced today that 2001 first-quarter underlying net earnings increased 2.2% to $2.1 billion, and underlying diluted earnings per share rose 6.7% to $0.95 per share.

However, if Philip Morris had owned Nabisco for all of 2000, rather than from the actual acquisition date of December 11, 2000, underlying net earnings would have risen 10.6% and underlying diluted earnings per share would have risen 15.9%.

“Philip Morris started the year with good momentum and our results are in line with our expectations,” said Geoffrey C. Bible, chairman of the board and chief executive officer. “For the first quarter, our domestic tobacco business delivered solid gains in income and good share performance, despite a decline in volume. Our international tobacco business delivered increases in both volume and income, and gained share in most of its important markets. New products and the acquisition of Nabisco drove the growth of both our North American and international food businesses, generating gains in volume and income. While volume and income were down in our beer business, we are addressing the challenges.”

“We remain comfortable with our previously disclosed projections for full-year 2001 underlying earnings per share growth rates of 9%-11%, including the dilutive impact of the Nabisco acquisition, and 13%-15% on an underlying cash earnings per share basis, which excludes the impact of goodwill amortization. However, the impact of adverse currency, as well as other factors described in the Forward-Looking and Cautionary Statements section of this release, will continue to be a risk to these projections,” Bible concluded.

During the quarter, Kraft Foods Inc. filed a registration statement with the Securities and Exchange Commission (SEC) for the planned initial public offering (IPO) of its global food business and expects to complete the IPO by the end of the second quarter. Due to SEC regulations, the company will not comment further about the IPO.

Philip Morris completed its previously announced three-year $8 billion dollar share repurchase program in the first quarter and announced a new three-year $10 billion dollar share repurchase program. The company repurchased 21.5 million shares of its common stock at a cost of $1.0 billion during the first quarter.

Reported Results

On a reported basis, operating revenues increased 11.6% to $22.4 billion; operating companies income increased 11.9% to $4.3 billion; net earnings rose 4.0% to $2.1 billion; and diluted earnings per share rose 8.0% to $0.94. Reported results include the operating results of Nabisco in 2001, but not in 2000, and a $6 million after-tax cumulative effect of an accounting change to reflect the cost of adopting Financial Accounting Standards Board pronouncements applicable to accounting for derivative financial instruments.

Underlying Results

On an underlying basis, which includes results for Nabisco in 2001 but not in 2000, and adjustments for certain items as detailed on the last page of this release, operating revenues increased 10.8% to $22.4 billion; operating companies income increased 10.1% to $4.4 billion; net earnings rose 2.2% to $2.1 billion; and diluted earnings per share rose 6.7% to $0.95. Excluding an unfavorable currency impact of $106 million, underlying operating companies income would have been up 12.8%.

DOMESTIC TOBACCO

Underlying operating companies income for Philip Morris Incorporated (PM USA), the company’s domestic tobacco business, increased 7.7% to $1.2 billion in the first quarter, due largely to pricing and the solid share performance of Marlboro and its other major premium brands.

PM USA’s shipment volume declined 2.3% to 51.6 billion units, while industry volume declined 3.7% to a total of 98.5 billion units. However, after adjusting for trade inventories and other factors, PM USA estimates that industry volume declined by 1% to 2%.

PM USA’s shipment share increased 0.8 points to a record 52.4%, due to continued share gains by its premium brands Marlboro, Parliament and Virginia Slims. According to consumer purchase data from Information Resources Inc./Capstone, PM USA’s retail share was up 0.4 points to 50.9% in the first quarter.

The industry premium segment’s shipment share grew 0.7 points to 74.6%, while PM USA’s shipment share of the premium segment rose 1.2 points to 62.9%. At retail, although the industry premium segment’s share was down 0.3 points to 73.6%, the segment was up 0.1 points when compared to the third and fourth quarters of 2000. PM USA’s retail share of the premium segment increased 0.8 points to 61.4% in the first quarter.

Marlboro’s shipment share was up 1.1 points to a record 39.9%. Marlboro’s retail share increased 1.0 points to 38.0% in the first quarter. Marlboro Milds, introduced nationally in April 2000 as an addition to the Marlboro Menthol family, achieved a retail share of 0.6%, helping maintain Marlboro Menthol as the fastest growing menthol brand in the U.S.

PM USA’s other premium brands, which include Virginia Slims, Parliament, Benson & Hedges and Merit, accounted for 7.1% of industry shipments as a group, up 0.3 points from 2000. The share gain was driven by Parliament, up 0.5 points to 1.5%, which benefited from shipments supporting its upcoming national launch, and Virginia Slims, up 0.1 points to 2.4%.

In the discount segment, Basic’s share of total industry shipments was down 0.1 points to 4.9%, but was up 0.2 points at retail.

INTERNATIONAL TOBACCO

Underlying operating companies income for Philip Morris International (PMI), the company’s international tobacco business, increased 4.6% to $1.6 billion due to higher pricing and increased volume. Excluding an unfavorable currency impact of $86 million, PMI operating companies income grew 10.3%.

Underlying shipment volume increased 2.6% to 179.7 billion units, despite unfavorable comparisons with 2000 that included one less trading day this year and distortions in trade purchasing patterns in a number of markets such as France, Switzerland, the United Kingdom, Central Europe, Kazakhstan and Brazil.

PMI gained share in 20 of its top 25 income markets, with gains of one share point or more in Austria, Belgium, France, Hungary, Israel, Italy, Japan, Mexico, Poland, Russia, Saudi Arabia, Singapore, Spain and Turkey.

In Western Europe, volume was up 1.3%, with strong gains in Italy and Spain offset by lower volume in Germany. In Germany, volume declined 9.3% and share was lower due to a significant decline in the vending segment, which disproportionately affected volume due to PMI’s large share in that segment, and the growth of trade discount brands. Excluding Germany, aggregate volume in Western Europe rose a strong 4.6%. PMI posted share gains in Austria, Belgium, France, Italy, the Netherlands, Portugal, Spain, Sweden and the United Kingdom.

In Eastern Europe, volume increased 6.4%, led by strong increases in Russia and Ukraine, where brand mix improved as well. Volume declined in the Baltics and Kazakhstan due to intense competition in the low price segment. Kazakhstan was further impacted by trade inventory distortions.

In Central Europe, the Middle East and Africa (Cema), volume increased 4.2%. Despite distortions in Poland, the Czech Republic and the Slovak Republic, primarily due to trade purchasing patterns, share gains were recorded in each of these markets, as well as Hungary, Saudi Arabia and Turkey.

In Asia, volume rose a strong 7.2%, driven by particularly strong growth in Japan, Indonesia and Korea. In Japan, share rose to a record 22.1% driven by the continued solid growth of Marlboro and Parliament. Volume increased strongly in Indonesia, led by Marlboro, and was also up in Korea, Malaysia, Taiwan and Thailand. Volume declined in the Philippines, reflecting difficult economic conditions.

In Latin America, volume declined 3.7%, due principally to Argentina and Brazil. In Argentina, the total cigarette industry and Marlboro declined due to the weak economy. However, PMI’s share was up, driven by record market share for the Philip Morris brand. In Mexico, Marlboro achieved a record share of 40.8%, driving continued volume growth in that market.

Total international brand volume for the quarter grew 3.1%. Marlboro volume was up 0.7%, as strong growth in Indonesia, Italy, Japan, Korea, Mexico, Russia, Spain, Turkey and Ukraine, was offset by the previously mentioned trade purchasing distortions and weakness in Germany and Argentina. Volume increased for L&M, the third-largest international cigarette brand, driven primarily by gains in Eastern Europe and Asia. Other international brands continued to perform well, including Parliament in Turkey; Chesterfield in France, Russia, Spain and Ukraine; and Bond Street in Russia and Ukraine.

NORTH AMERICAN FOOD

Underlying volume for Kraft Foods North America (KFNA) rose 35.2% and underlying operating companies income rose 25.1% to $1.2 billion, driven primarily by the acquisition of Nabisco.

Assuming that Philip Morris owned Nabisco for all of 2000, underlying volume would have increased 3.3%, reflecting the success of new products and higher volume in beverages. On the same basis, underlying operating companies income would have increased 6.5%, driven by increased volume, continued productivity savings and lower coffee commodity costs.

Volume increased in all four of KFNA’s major businesses for the quarter.

Cheese, Meals and Enhancers underlying volume increased 11.8%, aided by the acquisition of Nabisco. If Philip Morris had owned Nabisco for all of 2000, underlying volume would have increased 1.0% as increased shipments to grocery customers were partially offset by a decline in foodservice businesses. In cheese, volume declined due to lower Velveeta cheese shipments and the exit of lower-margin, non-branded products, partially offset by strong performance in Kraft natural cheese, Philadelphia cream cheese, and Breakstone’s cottage cheese and sour cream. Meals recorded volume gains, reflecting higher shipments of Kraft macaroni and cheese dinners and Minute rice. In enhancers, volume increased due to gains in Kraft mayonnaise, Kraft salad dressings and A.1. steak sauce.

Biscuits, Snacks and Confectionery underlying volume increased more than 100%, driven by the acquisition of Nabisco. If Philip Morris had owned Nabisco for all of 2000, underlying volume would have increased 3.3%, due primarily to gains in biscuits, including Oreo, Ritz, Wheat Thins and Triscuit. New products also contributed to the strong biscuit volume results, including Mini Oreos, Mini Ritz and Peanut Butter ChipsAhoy! In salty snacks, volume declined due primarily to lower shipments of Planters nuts to non-grocery channels. Confectionery volume increased, driven by successful new products including Terry’s Chocolate Raspberry, Creme Savers bagged candies and Life Savers jelly beans.

Beverages, Desserts and Cereals underlying volume increased 9.8%. If Philip Morris had owned Nabisco for all of 2000, underlying volume would have increased 7.1%. Refreshment beverages recorded double-digit gains in Capri Sun and Tang pouch ready-to-drink beverages. In coffee, higher volume resulted from increases in Starbucks coffee sold through grocery stores and Maxwell House coffee, which benefited from an increase in overall coffee consumption. Volume performance in the desserts business was slightly below the prior year, as increases in Cool Whip whipped toppings and Balance Bar nutrition and energy snack bars were more than offset by lower shipments of Jell-O dry packaged and refrigerated ready-to-eat desserts. Post cereal volume declined due primarily to increased competition in the ready-to-eat cereal category.

Oscar Mayer and Pizza underlying volume increased 2.9% and would have been the same if Philip Morris had owned Nabisco for all of 2000. The processed meats business recorded volume gains in hot dogs, bacon, luncheon meats and Boca Foods meat alternatives. Lunchables lunch combinations volume was down due to timing of shipments, but consumption remained strong at retail, benefiting from continued momentum in Lunchables Mega Pack and the introduction of Lunchables Fun Snacks. The frozen pizza business continued to record strong growth, with gains in Tombstone, Jack’s and Digiorno aided by the continued strength of DiGiorno Half and Half frozen pizza.

INTERNATIONAL FOOD

Underlying volume for Kraft Foods International (KFI) grew 37.8% and underlying operating companies income increased 16.6% to $239 million, primarily benefiting from the acquisition of Nabisco.

Assuming Philip Morris owned Nabisco for all of 2000, underlying volume would have increased 3.3%, benefiting from gains across most key categories and in the developing markets of Central and Eastern Europe, as well as Latin America and Asia Pacific. On the same basis, underlying operating companies income would have increased 8.6%, driven by volume growth and productivity savings. Excluding an unfavorable currency impact of $16 million, underlying operating companies income would have increased 15.9%.

Europe, Middle East and Africa (EMEA) underlying volume increased 1.9%. If Philip Morris had owned Nabisco for all of 2000, underlying volume would have increased 0.4% as gains in the developing markets of Central and Eastern Europe and growth in numerous Western European markets were offset primarily by a volume decline in Germany and lower canned meats volume in Italy.

In beverages, coffee volume was lower due to Germany, which was affected by reduced trade purchases in anticipation of lower coffee prices. However, higher coffee volume was reported in numerous markets including the Czech Republic, France, Greece, Italy, Poland, Romania, Russia and Ukraine, benefiting from successful marketing programs and new product launches. New products include the expansion of Gevalia Ebony to Denmark and Jacobs Milea to Poland and the launch of Jacobs Ebony in the Czech and Slovak Republics. Refreshment beverages volume grew strongly, driven by higher Tang sales in Egypt, Lebanon and the Czech Republic.

Snacks volume increased, driven by favorable confectionery and salty snacks performance. Confectionery volume was favorable in numerous markets, benefiting from the growth of Milka in France, Cote d’Or in Belgium, 3-Bit in Poland and the Czech Republic, Figaro in the Slovak Republic and Korona in Ukraine. Volume for salty snacks also grew, driven by gains in Norway, Lithuania, Ukraine and Russia.

Cheese volume grew strongly, benefiting from the favorable performance of Philadelphia cream cheese in Italy, Belgium and Spain, Kraft Sottilette cheese in Italy, El Caserio slices and portions in Spain and Dairylea spreads in the United Kingdom. In grocery, lower ketchup volume in Germany was partially offset by higher Kraft mayonnaise sales in Spain and Greece.

Latin America and Asia Pacific (LAAP) underlying volume increased more than 100%. If Philip Morris had owned Nabisco for all of 2000, underlying volume would have increased 7.5%, driven by gains across most categories and in numerous markets including Australia, Brazil, China, Japan, Korea, Peru and Southeast Asia.

Double-digit beverage volume growth was driven by successful performance of refreshment beverages, including Tang powdered soft drinks in Brazil, China and the Philippines, Fresh powdered soft drinks in Brazil, Verao powdered soft drinks in Argentina, and Maguary juice concentrate in Brazil. Coffee volume gains reflected the continued success of Maxwell House coffee mix in China.

In snacks, higher biscuit volume was driven by Club Social and Trakinas in Brazil and higher sales in China. In confectionery, volume grew in Asia Pacific, reflecting the continued success of Sugus chewy candy in China and Southeast Asia.

Cheese volume grew, driven by Philadelphia cream cheese in Australia, Japan and the Caribbean, Kraft Singles in Australia and Kraft Eden cheese in the Philippines. Grocery volume was up, benefiting from the growth of Kraft mayonnaise and Miracle Whip in the Philippines.

During the quarter, KFI further strengthened its coffee businesses in developing markets with acquisitions in Bulgaria, Romania and Morocco.

BEER

Underlying operating companies income for Miller Brewing Company (Miller) declined 18.4% to $124 million, due to lower volume as well as double-digit increases in marketing spending behind its core premium brands.

Domestic underlying shipment volume declined 5.3% to 9.4 million barrels, and was lower for Miller Lite, Miller Genuine Draft, Miller High Life, Icehouse and Foster’s, partially reflecting Miller’s decision to reduce distributor inventories.

FINANCIAL SERVICES

Underlying operating companies income for Philip Morris Capital Corporation (PMCC) rose 10.3% to $64 million, 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 ($88.3 billion assuming Philip Morris owned Nabisco for all of 2000), 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. 

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 unfavorable currency movements, intense competition, changes in consumer preferences and demand for their products, changing prices for raw materials and the effects of foreign economies and local economic and market conditions, particularly in the Company’s tobacco and food businesses in Germany. 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, 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 Quarters Ended March 31,
($ in millions, except per share data)

REPORTED
————————————–
2001 2000 % Change
———- ————- ————

Operating revenues $22,359 $ 20,040 11.6 %

Cost of sales 8,225 7,303 12.6 %
Excise taxes on products 4,377 4,450 (1.6)%
———- ————-

Gross profit 9,757 8,287 17.7 %

Marketing, administration
and research costs 5,398 4,416 22.2 %
Loss on sale of domestic
food factory 29 –
———- ————-

Operating companies income 4,330 3,871 11.9 %

Amortization of goodwill 253 146
Minority interest 35 32
General corporate expenses 210 215
Interest and other debt
expense, net 451 185
———- ————-

Earnings before income taxes 3,381 3,293 2.7 %

Provision for income taxes 1,285 1,284 0.1 %
———- ————-
Earnings before cumulative
effect of
accounting change 2,096 2,009 4.3 %

Cumulative effect of change in
accounting for derivatives
and hedging activities (6) –

———- ————-
Net earnings $ 2,090 $ 2,009 4.0 %
========== =============

Basic earnings per share before
cumulative effect of
accounting change $ 0.95 $ 0.87 9.2 %
========== =============

Diluted earnings per share
before cumulative effect
of accounting change $ 0.94 $ 0.87 8.0 %
========== =============

Basic earnings per share after
cumulative effect of
accounting change $ 0.95 $ 0.87 9.2 %
========== =============
Diluted earnings per share
after cumulative effect
of accounting change $ 0.94 $ 0.87 8.0 %
========== =============

UNDERLYING ( a )
————————————–

2001 2000 % Change
———- ————- ————

Operating revenues $22,359 $ 20,185 10.8 %
Operating companies income $ 4,359 $ 3,958 10.1 %
Net earnings $ 2,114 $ 2,069 2.2 %
========== =============
Basic earnings per share after
cumulative effect of
accounting change $ 0.96 $ 0.89 7.9 %
========== =============
Diluted earnings per share
after cumulative effect
of accounting change $ 0.95 $ 0.89 6.7 %
========== =============
Weighted average number of
shares outstanding-Basic 2,201 2,315 (4.9)%
– Diluted 2,229 2,318 (3.8)%

( a ) See notes on last page.

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

OPERATING REVENUES REPORTED
——————————— ———————————–
2001 2000 % Change
———- ———— ———–

Domestic tobacco $ 5,922 $ 5,446 8.7 %
International tobacco 6,979 7,127 (2.1)%
Incremental Year 2000 business – (129)
———- ————
International tobacco, net 6,979 6,998 (0.3)%
North American food 6,282 4,605 36.4 %
Incremental Year 2000 business – (71)
———- ————
North American food, net 6,282 4,534 38.6 %
International food 2,085 1,952 6.8 %
Incremental Year 2000 business – (26)
———- ————
International food, net 2,085 1,926 8.3 %
Beer 991 1,044 (5.1)%
Financial services 100 92 8.7 %
———- ————
Total operating revenues $22,359 $ 20,040 11.6 %
========== ============

OPERATING COMPANIES INCOME REPORTED
——————————— ———————————–
2001 2000 % Change
———- ———— ———–

Domestic tobacco $ 1,202 $ 1,116 7.7 %
International tobacco 1,558 1,490 4.6 %
Incremental Year 2000 business – (59)
———- ————
International tobacco, net 1,558 1,431 8.9 %
North American food 1,172 940 24.7 %
Incremental Year 2000 business – (27)
Loss on sale of domestic food
factory (29) –
———- ————
North American food, net 1,143 913 25.2 %
International food 239 213 12.2 %
Incremental Year 2000 business – (13)
———- ————
International food, net 239 200 19.5 %
Beer 124 153 (19.0)%
Financial services 64 58 10.3 %
———- ————
Total operating companies income $ 4,330 $ 3,871 11.9 %
========== ============

OPERATING REVENUES UNDERLYING ( a )
——————————— ———————————–
2001 2000 % Change
———- ———— ———–

Domestic tobacco $ 5,922 $ 5,446 8.7 %
International tobacco 6,979 7,127 (2.1)%
Incremental Year 2000 business – –
———- ————
International tobacco, net 6,979 7,127 (2.1)%
North American food 6,282 4,598 36.6 %
Incremental Year 2000 business – –
———- ————
North American food, net 6,282 4,598 36.6 %
International food 2,085 1,906 9.4 %
Incremental Year 2000 business – –
———- ————
International food, net 2,085 1,906 9.4 %
Beer 991 1,016 (2.5)%
Financial services 100 92 8.7 %
———- ————
Total operating revenues $22,359 $ 20,185 10.8 %
========== ============

OPERATING COMPANIES INCOME UNDERLYING ( a )
——————————— ———————————–
2001 2000 % Change
———- ———— ———–

Domestic tobacco $ 1,202 $ 1,116 7.7 %
International tobacco 1,558 1,490 4.6 %
Incremental Year 2000 business – –
———- ————
International tobacco, net 1,558 1,490 4.6 %
North American food 1,172 937 25.1 %
Incremental Year 2000 business – –
Loss on sale of domestic food
factory – –
———- ————
North American food, net 1,172 937 25.1 %
International food 239 205 16.6 %
Incremental Year 2000 business – –
———- ————
International food, net 239 205 16.6 %
Beer 124 152 (18.4)%
Financial services 64 58 10.3 %
———- ————
Total operating companies income $ 4,359 $ 3,958 10.1 %
========== ============
( a )See notes on last page.

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

March 31, December 31,
2001 2000
———— ————
Assets

Cash and cash equivalents $ 426 $ 937

All other current assets 16,180 16,301

Property, plant and equipment, net 15,259 15,303

Goodwill and other intangible
assets, net 33,159 33,090

Other assets 4,912 5,034
———— ————

Total consumer products assets 69,936 70,665

Total financial services assets 8,362 8,402
———— ————

Total assets $ 78,298 $ 79,067
============ ============

Liabilities and Stockholders’ Equity

Accrued settlement charges $ 1,869 $ 2,724

All other current liabilities 23,755 23,225

Long-term debt 17,817 18,255

Other long-term liabilities 12,387 12,431
———— ————

Total consumer products liabilities 55,828 56,635

Total financial services
liabilities 7,330 7,427
———— ————

Total liabilities 63,158 64,062

Total stockholders’ equity 15,140 15,005
———— ————

Total liabilities and
stockholders’ equity $ 78,298 $ 79,067
============ ============

Total consumer products debt $ 28,606 $ 27,196

Debt/equity ratio – consumer products 1.89 1.81

Total debt $ 30,460 $ 29,122

Total debt/equity ratio 2.01 1.94

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

The following pre-tax items had an impact on underlying results in
2001 and 2000:

First First
Quarter Quarter
2001 2000

– Loss on sale of domestic food factory $ 29 $ –

– Related to incremental Year 2000
business:(a)
International tobacco – (59)
North American food – (27)
International food – (13)

—– ——
$ 29 $ (99)
===== ======

(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 2000 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 2000. No assumptions were made as
to the application of proceeds from the sales of any operations.

Underlying results exclude the cumulative effect of change in
accounting for derivatives and hedging activities.

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.