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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 7, 2001
PHILIP MORRIS COMPANIES INC.
(Exact name of registrant as specified in its charter)
Virginia 1-8940 13-3260245
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
120 Park Avenue, New York, New York 10017-5592
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (917) 663-5000
(Former name or former address, if changed since last report.)
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Item 5. Other Events.
On May 7, 2001, Philip Morris Companies Inc. (the "Company") announced that
its domestic tobacco subsidiary, Philip Morris Incorporated ("Philip Morris
USA"), together with certain other Engle defendants ("Participating
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Defendants"), as obtained trial court approval of a Stipulation and Agreed Order
Regarding Stay of Execution Pending Review and Related Matters (the
"Stipulation") between Philip Morris USA and the plaintiffs and the plaintiff
class in the Engle smoking and health class action in Florida. The Stipulation
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provides that execution or enforcement of the punitive damages component of the
judgment in the Engle class action will remain stayed against Philip Morris USA
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and the other Participating Defendants through the completion of all judicial
review.
As a result of the Stipulation and in addition to the $100 million bond it
has already posted, Philip Morris USA will put $1.2 billion into an interest
bearing escrow account. Should Philip Morris USA prevail in its appeal of the
case, both amounts would return to Philip Morris USA. Philip Morris USA will
also place an additional $500 million into a separate interest bearing escrow
account. If Philip Morris USA prevails in its appeal, this amount would be paid
to the court and the court will determine how to allocate or distribute it
consistent with the Florida Rules of Civil Procedure.
The Company will restate its consolidated earnings for the first quarter of
2001 to reflect a $500 million pre-tax charge to earnings. The charge is
expected to be approximately $300 million on an after-tax basis. The charge
does not affect the Company's underlying net earnings for the first quarter of
2001.
The restatement of first quarter earnings will not affect the Company's
previously disclosed projected growth rates for 2001 underlying earnings per
share and underlying cash earnings per share. However, the impact of adverse
currency, as well as other factors described in the Forward-Looking and
Cautionary Statements included in this Form 8-K, will continue to be a risk to
these projections.
The Stipulation is attached as Exhibit 99.2 to this Form 8-K and the
foregoing is qualified in all respects by reference thereto. The Company's Form
10-Q for the quarter ended March 31, 2001, will include a further description of
the accounting treatment for the Stipulation.
Forward-Looking and Cautionary Statements
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The Company and its representatives may from time to time make written
or oral forward-looking statements, including statements contained in the
Company's filings with the Securities and Exchange Commission and in its reports
to stockholders. One can identify these forward-looking statements by use of
words such as "strategy," "expects," "plans," "believes," "will," "estimates,"
"intends," "projects," "goals," "target" and other words of similar meaning. One
can also identify them by the fact that they do not relate strictly to
historical or current facts. In connection with the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995, the Company is hereby
identifying important factors that could cause actual results and outcomes to
differ materially from those contained in any forward-looking statement made by
or on behalf of the Company. Any such statement is qualified by reference to the
following cautionary statements.
The tobacco industry continues to be subject to health concerns relating
to the use of tobacco products and exposure to environmental tobacco smoke,
legislation, including actual and potential excise tax increases, increasing
marketing and regulatory restrictions, governmental regulation, privately
imposed smoking restrictions, governmental and grand jury investigations,
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
adequate appellate remedies to get timely relief from any of the foregoing, and
the effects of price increases related to concluded tobacco litigation
settlements and excise tax increases on consumption rates. Each of the Company's
consumer products subsidiaries is subject to intense competition, changes in
consumer preferences, the effects of changing prices for its raw materials and
local economic conditions. 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. In addition, Philip Morris International Inc., Kraft Foods
International, Inc. and Kraft Foods North America, Inc. are subject to the
effects of foreign economies and the related shifts in consumer preferences, and
currency movements. Developments in any of these areas, which are more fully
described in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, could cause the Company's results to differ materially from
results that have been or may be projected by or on behalf of the Company. The
Company cautions that the foregoing list of important factors is not exclusive.
The Company does not undertake to update any forward-looking statement that may
be made from time to time by or on behalf of the Company.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) and (b) Historical Financial Statements and Pro Forma Financial Information:
Not applicable.
(c) Exhibits.
99.1 Press Release.
99.2 Stipulation and Agreed Order Regarding Stay of Execution Pending
Review and Related Matters.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHILIP MORRIS COMPANIES INC.
By: /s/ G. PENN HOLSENBECK
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Name: G. Penn Holsenbeck
Title: Vice President, Associate
General Counsel and Corporate
Secretary
DATE: May 7, 2001
EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release.
99.2 Stipulation and Agreed Order Regarding Stay of Execution Pending
Review and Related Matters.