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Philip Morris Cos. Inc.

Posted On: 5/25/2001

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Philip Morris Cos. Inc. announced that 2001 first-quarter underlying net earnings increased 2.2 percent to $2.1 billion, and underlying diluted earnings per share rose 6.7 percent to $0.95 per share.

However, if Philip Morris had owned Nabisco for all of last year, rather than from the actual acquisition date of December 11, 2000, underlying net earnings would have risen 10.6 percent and underlying diluted earnings per share would have risen 15.9 percent, compared with the 2000 first-quarter results that would have been attained, the company reported.

Underlying results include the operating results of Nabisco in 2001, but not in 2000, and adjust for certain items including divested operations since the beginning of 2001, as well as $100 million in income on sales that normally would have occurred in January 2000, but were made in 1999 as the company's customers planned for potential Y2K-related problems.

Reported net earnings rose 4.0 percent to $2.1 billion, and diluted earnings per share rose 8 percent to $0.94. Reported results also include the operating results of Nabisco in 2001, but not in 2000, as well as the $6 million after-tax cumulative effect of an accounting change to reflect the cost of adopting necessary Financial Accounting Standards Board procedures.

"Phillip 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."

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

In biscuits, snacks and confectionary, underlying volume increased more than 100 percent, driven by the acquisition of Nabisco. If Philip Morris had owned Nabisco for all of 2000, underlying volume would have increased 3.3 percent, due primarily to gains in biscuits, including "Oreo," "Ritz," "Wheat Thins" and "Triscuit." New products also contributed to the strong biscuit results, including "Mini Oreos," "Mini Ritz" and "Peanut Butter Chips Ahoy!"

In salty snacks, volume declined, due primarily to lower shipments of "Planters" nuts to non-grocery channels. Confectionary volume increased, driven by successful new products including "Terry's Chocolate Raspberry," "Crème Savers" bagged candies, and "Life Savers" jelly beans.

"Capri Sun" and "Tang" pouch ready-to-drink "refreshment beverages" recorded double-digit gains. In coffee, higher volume resulted from increases in "Starbucks" coffee sold through grocery stores, and of "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 "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.

The company's processed meats business recorded volume gains in hot dogs, bacon, luncheon meats and 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.

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

Bible said that the company remains comfortable with its previously-disclosed projections for full-year 2001 underlying earnings-per-share growth rates of 9-11 percent, including the dilutive impact of the Nabisco acquisition and 13-15 percent on an underlying cash earnings-per-share basis.