Philip Morris Reports 2001 First-Quarter Results -- Reported Net EarningsUp 40% -- Underlying Net Earnings Up 2.2%
NEW YORK, Apr 17, 2001 (BUSINESS WIRE) --
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.Audio Webcast: A conference call with members of the investment community will beWebcast at 10:30 a.m. ET on April 17, 2001. Access is available at philipmorris.com 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 2001first-quarter underlying net earnings increased 2.2% to $2.1 billion,and underlying diluted earnings per share rose 6.7% to $0.95 pershare. 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 dilutedearnings per share would have risen 15.9%. "Philip Morris started the year with good momentum and our resultsare in line with our expectations," said Geoffrey C. Bible, chairmanof the board and chief executive officer. "For the first quarter, ourdomestic tobacco business delivered solid gains in income and goodshare performance, despite a decline in volume. Our internationaltobacco business delivered increases in both volume and income, andgained share in most of its important markets. New products and theacquisition of Nabisco drove the growth of both our North American andinternational food businesses, generating gains in volume and income.While volume and income were down in our beer business, we areaddressing the challenges." "We remain comfortable with our previously disclosed projectionsfor full-year 2001 underlying earnings per share growth rates of 9%-11%, including the dilutive impact of the Nabisco acquisition, and13%-15% on an underlying cash earnings per share basis, whichexcludes the impact of goodwill amortization. However, the impact ofadverse currency, as well as other factors described in theForward-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 registrationstatement with the Securities and Exchange Commission (SEC) for theplanned initial public offering (IPO) of its global food business andexpects to complete the IPO by the end of the second quarter. Due toSEC regulations, the company will not comment further about the IPO. Philip Morris completed its previously announced three-year $8billion dollar share repurchase program in the first quarter andannounced a new three-year $10 billion dollar share repurchaseprogram. The company repurchased 21.5 million shares of its commonstock at a cost of $1.0 billion during the first quarter.Reported Results On a reported basis, operating revenues increased 11.6% to $22.4billion; operating companies income increased 11.9% to $4.3 billion;net earnings rose 4.0% to $2.1 billion; and diluted earnings per sharerose 8.0% to $0.94. Reported results include the operating results ofNabisco in 2001, but not in 2000, and a $6 million after-taxcumulative effect of an accounting change to reflect the cost ofadopting Financial Accounting Standards Board pronouncementsapplicable to accounting for derivative financial instruments.Underlying Results On an underlying basis, which includes results for Nabisco in 2001but not in 2000, and adjustments for certain items as detailed on thelast page of this release, operating revenues increased 10.8% to $22.4billion; operating companies income increased 10.1% to $4.4 billion;net earnings rose 2.2% to $2.1 billion; and diluted earnings per sharerose 6.7% to $0.95. Excluding an unfavorable currency impact of $106million, underlying operating companies income would have been up12.8%
.DOMESTIC TOBACCO Underlying operating
companies income for Philip MorrisIncorporated (PM USA), the company's domestic tobacco business,increased 7.7% to $1.2 billion in the first quarter, due largely topricing and the solid share performance of Marlboro and its othermajor 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, PMUSA 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 datafrom Information Resources Inc./Capstone, PM USA's retail share was up0.4 points to
50.9% in the first quarter. The industry premium segment's shipment share grew 0.7 points to74.6%, while PM USA's shipment share of the premium segment rose 1.2points to 62.9%. At retail, although the industry premium segment'sshare was down 0.3 points to 73.6%, the segment was up 0.1 points whencompared to the third and fourth quarters of 2000. PM USA's retailshare of the premium segment increased 0.8 points to 61.4% in thefirst 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 firstquarter. Marlboro Milds, introduced nationally in April 2000 as anaddition to the Marlboro Menthol family, achieved a retail share of0.6%, helping maintain Marlboro Menthol as the fastest growing mentholbrand in the U.S. PM USA's other premium brands, which include Virginia Slims,Parliament, Benson & Hedges and Merit, accounted for 7.1% of industryshipments as a group, up 0.3 points from 2000. The share gain wasdriven by Parliament, up 0.5 points to 1.5%, which benefited fromshipments 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 shipmentswas down 0.1 points to 4.9%, but was up 0.2 points at retail.
INTERNATIONAL TOBACCO
Underlying operating companies income for Philip MorrisInternational (PMI), the company's international tobacco business,increased 4.6% to $1.6 billion due to higher pricing and increasedvolume. Excluding an unfavorable currency impact of $86 million, PMIoperating companies income grew 10.3%. Underlying shipment volume increased 2.6% to 179.7 billion units,despite unfavorable comparisons with 2000 that included one lesstrading day this year and distortions in trade purchasing patterns ina 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 ofone share point or more in Austria, Belgium, France, Hungary, Israel,Italy, Japan, Mexico, Poland, Russia,
Saudi Arabia, Singapore, Spainand Turkey. In Western Europe, volume was up 1.3%, with strong gains in Italyand Spain offset by lower volume in Germany. In Germany, volumedeclined 9.3% and share was lower due to a significant decline in thevending segment, which disproportionately affected volume due to PMI'slarge share in that segment, and the growth of trade discount brands.Excluding Germany, aggregate volume in Western Europe rose a strong4.6%. PMI posted share gains in Austria, Belgium, France, Italy, theNetherlands, Portugal, Spain, Sweden and the United Kingdom. In Eastern Europe, volume increased 6.4%, led by strong increasesin Russia and Ukraine, where brand mix improved as well. Volumedeclined in the Baltics and Kazakhstan due to intense
competition inthe low price segment. Kazakhstan was further impacted by tradeinventory distortions. In Central Europe, the Middle East and Africa (CEMA), volumeincreased 4.2%. Despite distortions in Poland, the Czech Republic andthe Slovak Republic, primarily due to trade purchasing patterns, sharegains 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 stronggrowth in Japan, Indonesia and Korea. In Japan, share rose to a record22.1% driven by the continued solid growth of Marlboro and Parliament.Volume increased strongly in Indonesia, led by Marlboro, and was alsoup in Korea, Malaysia, Taiwan and Thailand. Volume declined in thePhilippines, reflecting difficult economic conditions. In Latin America, volume declined 3.7%, due principally toArgentina and Brazil. In Argentina, the total cigarette industry andMarlboro declined due to the weak economy. However, PMI's share wasup, driven by record market share for the Philip Morris brand. InMexico, Marlboro achieved a record share of 40.8%, driving continuedvolume 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 bythe previously mentioned trade purchasing distortions and weakness inGermany and Argentina. Volume increased for L&M, the third-largestinternational cigarette brand, driven primarily by gains in EasternEurope
and Asia. Other international brands continued to perform well,including Parliament in Turkey; Chesterfield in France, Russia, Spainand 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 lowercoffee commodity costs. Volume increased in all four of KFNA's major businesses for thequarter. 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 adecline in foodservice businesses. In cheese, volume declined due tolower Velveeta cheese shipments and the exit of lower-margin,non-branded products, partially offset by strong performance in Kraftnatural cheese, Philadelphia cream cheese, and Breakstone's cottagecheese and sour cream. Meals recorded volume gains, reflecting highershipments of Kraft macaroni and cheese dinners and Minute rice. Inenhancers, volume increased due to gains in Kraft mayonnaise, Kraft salad dressings and A.1. steak sauce. Biscuits, Snacks and Confectionery underlying volume increasedmore than 100%, driven by the acquisition of Nabisco. If Philip Morrishad owned Nabisco for all of 2000, underlying volume would haveincreased 3.3%, due
primarily to gains in biscuits, including Oreo,Ritz, Wheat Thins and Triscuit. New products also contributed to thestrong biscuit volume results, including Mini Oreos, Mini Ritz andPeanut Butter ChipsAhoy! In salty snacks, volume declined dueprimarily to lower shipments of Planters nuts to non-grocery channels.Confectionery volume increased, driven by successful new productsincluding Terry's Chocolate Raspberry, Creme Savers bagged candies andLife Savers jelly beans. Beverages, Desserts and Cereals underlying volume increased 9.8%.If Philip Morris had owned Nabisco for all of 2000, underlying volumewould have increased 7.1%. Refreshment beverages recorded double-digitgains in Capri Sun and Tang pouch ready-to-drink beverages. In coffee,higher volume resulted
from increases in Starbucks coffee sold throughgrocery stores and Maxwell House coffee, which benefited from anincrease in overall coffee consumption. Volume performance in thedesserts business was slightly below the prior year, as increases in Cool Whip whipped toppings and Balance Bar nutrition and energy snackbars were more than offset by lower shipments of Jell-O dry packagedand refrigerated ready-to-eat desserts. Post cereal volume declineddue primarily to increased competition in the ready-to-eat cereal category. Oscar Mayer and Pizza underlying volume increased 2.9% and wouldhave 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 lunchcombinations volume was down due to timing of shipments, butconsumption remained strong at retail, benefiting from continuedmomentum in Lunchables Mega Pack and the introduction of LunchablesFun Snacks. The frozen pizza business continued to record stronggrowth, with gains in Tombstone, Jack's and DiGiorno aided by thecontinued 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 $239million, primarily benefiting from the acquisition of Nabisco. Assuming Philip Morris owned Nabisco for all of 2000, underlyingvolume would have increased 3.3%, benefiting from gains across most key categories and in the developing markets of Central and EasternEurope, 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 operatingcompanies income would have increased 15.9%. Europe, Middle East and Africa (EMEA) underlying volume increased1.9%. If Philip Morris had owned Nabisco for all of 2000, underlying volume would have increased 0.4% as gains in the developing markets ofCentral and Eastern Europe and growth in numerous Western Europeanmarkets were offset primarily by a volume decline in Germany and lowercanned meats volume in Italy. In beverages, coffee volume was lower due to Germany, which was affected by reduced trade purchases in anticipation of lower coffeeprices. However, higher coffee volume was reported in numerous marketsincluding the Czech Republic, France, Greece, Italy, Poland, Romania,Russia and Ukraine, benefiting from successful marketing programs andnew product launches. New products include the expansion of GevaliaEbony to Denmark and Jacobs Milea to Poland and the launch of JacobsEbony in the Czech and Slovak Republics. Refreshment beverages volumegrew strongly, driven by higher Tang sales in Egypt, Lebanon and theCzech Republic. Snacks volume increased, driven by favorable confectionery andsalty snacks performance. Confectionery volume was favorable innumerous markets, benefiting from the growth of Milka in France, Coted'Or in Belgium, 3-Bit in Poland and the Czech Republic, Figaro in theSlovak Republic and Korona in Ukraine. Volume for salty snacks alsogrew, driven by gains in Norway, Lithuania, Ukraine and Russia. Cheese volume grew strongly, benefiting from the favorableperformance of Philadelphia cream cheese in Italy, Belgium and Spain,Kraft Sottilette cheese in Italy, El Caserio slices and portions inSpain and Dairylea spreads in the United Kingdom. In grocery, lowerketchup volume in Germany was partially offset by higher Kraftmayonnaise sales in Spain and Greece. Latin America and Asia Pacific (LAAP) underlying volume increasedmore than 100%. If Philip Morris had owned Nabisco for all of 2000,underlying volume would have increased 7.5%, driven by gains acrossmost categories and in numerous markets including Australia, Brazil,China, Japan, Korea, Peru and Southeast Asia. Double-digit beverage volume growth was driven by successfulperformance of refreshment beverages, including Tang powdered softdrinks in Brazil, China and the Philippines, Fresh powdered softdrinks in Brazil, Verao powdered soft drinks in Argentina, and Maguaryjuice 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 andTrakinas in Brazil and higher sales in China. In confectionery, volumegrew in Asia Pacific, reflecting the continued success of Sugus chewy candy in China and Southeast Asia. Cheese volume grew, driven by Philadelphia cream cheese inAustralia, Japan and the Caribbean, Kraft Singles in Australia andKraft Eden cheese in the Philippines. Grocery volume was up,benefiting from the growth of Kraft mayonnaise and Miracle Whip in thePhilippines. During the quarter, KFI further strengthened its coffee businessesin developing markets with acquisitions in Bulgaria, Romania andMorocco.BEER Underlying operating companies income for Miller Brewing Company(Miller) declined
18.4% to $124 million, due to lower volume as wellas double-digit increases in marketing spending behind its corepremium brands. Domestic underlying shipment volume declined 5.3% to 9.4 millionbarrels, and was lower for Miller Lite, Miller Genuine Draft, MillerHigh Life, Icehouse and Foster's, partially reflecting Miller'sdecision to reduce distributor inventories.
FINANCIAL SERVICES Underlying operating companies income for Philip Morris CapitalCorporation (PMCC) rose 10.3% to $64 million, driven by growth inleasing and structured finance investments and by continued gains derived from PMCC's finance asset portfolio.
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