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PM-U.S.A. Morning Newsbriefs; 07/12/94 (c) Copyright 1994 INFORMATION, INC. This service may be reproduced for internal distribution. HEADLINE SUMMARIES: "Philip Morris Reports Second Quarter Results" "Weld Signs Cigarette Law Authorizing Massachusetts to Sue t~ ® Cigarette Makers for Smoking-Related Medicaid Costs" "Teamsters Say They Won't Attend Philip Morris Meeting" (.A 0 ~ "Florida Judge Refuses to Delay or Dismiss Suit by Smokers" ~ "Joe Camel on Trial" "Two B.A.T. Affiliates Have Ratings Lowered" ® w ~ "S&P Affirms Dibrell Brothers Ratings" "Standard Commercial Cut to 'Hold' by Prudential" "Unlucky Strikes" "Baseball-Dental Group Urges Tobacco Ban by Players" "Executive Suite: Michael Miles--Unemployed and Loving 11" "Letters to the Editor: Insidious Smoke" "Obituary--Reynofds" "U.K. Eyes TV Ban on Tobacco-Sponsored Sports" "Japan Tobacco Offering May Test the Tokyo Market" "Philip Morris Reports Second Quarter Results" Highlights of Philip Morris Press Release (7/'S2/94) and 1994 Business Wire (7/12/94) Philip Morris this morning reported second quarter 1994 results, as follows: net earnings up 17.6%; net earnings per share up 19.3%, to $1.42 per share; Operating Companies income up 14.0%; Operating Companies revenues up 4.0%. Highlights of the report: --Philip Morris Companies Inc. posted solid gains in operating companies income, net earnings and net earnings per share in the second quarter. --Results were driven by the strong performance of the company's worldwide tobacco business. Good results from North American food and beer also contributed to the solid quarter. N ® N ~ 2 billion were up 17 6% and net earnings er --Net earnings of $1 0 . . p ~ share of $1.42 per share were up 19.3% from last year's 2nd quarter. ~ ® --Operating companies income rose 14.0% to $2.7 billion on w 10 , , revenues of $16.4 billion, 4.0% higher than the year-earlier period. N ~ i

--Each of the three major business segments -- food, tobacco and beer -- showed profit improvement on a worldwide basis. --The company's realignment of premium brand pricing in domestic tobacco continued to produce outstanding results: the most recent retail market shares for Philip Morris U.S.A. (46.6%) and Marlboro (28.5%) both were at record highs. --International tobacco operating revenues and income advanced strongly on higher volume in Europe and in the Asia/Pacific region. --Based on its strong underlying business performance and its increasingly sound financial position, the company continued to repurchase shares during the quarter under an existing board authority. TOBACCO Operating revenues from the company's worldwide tobacco opera- tions were $7.2 billion, 7.0% higher than a year ago. Operating income, at $1.5 billion, was up 22.4%, primarily due to volume gains in domestic and international markets. Worldwide cigarette volume increased 17.9%, to 187 billion units, from the prior year, while world- wide volume for Marlboro advanced 18.0%, to 99 billion units. Domestic Tobacco: Operating revenues for domestic tobacco were $2.9 billion, up 7.3%, while operating income, at $858 million, was 25.1 % higher than last year, largely due to higher volume. Quarterly operating income was at its highest level since the company began price promoting its Marlboro brand in last year's second quarter. The strategy, later converted into a permanent realignment of prices for Marlboro and the company's other premium brands, helped Philip Morris regain market share and improve the long-term profitability of its domestic tobacco business. The company's domestic shipment volume for the quarter was 57.9 billion units, up 21.9% over 1993, compared to the industry's esti- mated 11.0% increase. Marlboro's domestic shipment volume was up 46.6%, to 36.6 billion units. For the quarter, the company's total shipment share was 45.6%, an increase of 4 share points from the year-earlier period, while Marlboro's shipment share was up 6.9 points, to 28.8%. The volume gains reflected improved consumer sales due to the success of the company's new pricing strategy and its marketing and promotional programs. The gains, however, were inflated by a

reduction in wholesale inventories in last year's second quarter, which lowered reported volume, as well as by a small increase in trade inventories this year as wholesalers accelerated their purchases in anticipation of a possible rise in the federal excise tax. More profitable premium cigarettes claimed a greater share of the company's total volume mix in domestic tobacco for the quarter. Compared with shipments in last year's second quarter, the premium portion of the company's business was up 12 share points to 81.0%. At the retail level, according to the latest available A.C. Nielsen data, the company's overall share in May 1994 was at a record high of 46.6%, up 5 share points from March 1993, before the company began its Marlboro price promotion. The data indicates that Philip Morris' retail share has returned to its historical growth trend. The May Nielsen figures also show that retail share for Marlboro reached an all- time high of 28.5%, an increase of 6.5 share points compared with March 1993. Retail share of Philip Morris' other premium brands, as a group, was 9.1 %, up from a low of 8.3% in August 1993, when the company realigned their wholesale list prices. Among discount cigarettes, Basic remains one of the leading brands with an overall retail share of 4.7%. International Tobacco: International tobacco continued to grow strongly in the second quarter. Operating revenues advanced 6.8%, to $4.3 billion, and operating income climbed 19.2%, to $688 million, despite unfavorable currency movements. The results were achieved primarily on higher volume, which reached 128 billion units, up 16.3% from a year ago. International volume for the company's U.S.-heritage brands continued its strong growth trend in the second quarter. The company recorded strong volume gains in most markets, including Germany, Italy, France, Spain, Central and Eastern Europe, the Middle East, Japan, Korea, Argentina and Brazil. In Turkey, volume declined in the face of difficult economic conditions. Philip Morris' market share trends continued to be positive in its major international markets, with record shares achieved in Germany, Italy, France, Belgium, Holland, Finland, Japan, Korea, Hong Kong, Singapore, Argentina and Brazil. Volume rose substantially in Western Europe, Philip Morris' largest cigarette market outside of the U.S. Gains were recorded in most countries, mainly on the strong performance of the company's well- established U.S.-heritage brands, which include the Marlboro, Chesterfield, L&M and Philip Morris families. The Marlboro brand

i continued to lead the company's strong volume growth in Germany, while in Italy, Philip Morris products accounted for six of the top ten brands. In France, Chesterfield continued its strong upward share trend, and in Finland, L&M gained considerable share. In the Asia/Pacific region, the company delivered strong growth in Korea, Hong Kong, the Philippines, Indonesia and Japan. In Japan, the company's new ultra-low- tar product, Next, successfully launched last September, continued to grow strongly, reaching over one percent share of market. Coupled with strong growth from a number of the company's U.S.-heritage brands, these gains have driven Philip Morris' market share in Japan to an all-time high. The company continued to expand its international tobacco opera- tions in the second quarter, acquiring a majority interest in the Kharkov Tobacco Factory in the Ukraine. "Weld Signs Cigarette Law Authorizing Massachusetts to Sue Cigarette Makers for Smoking-Related Medicaid Costs" Wall Street Journal (07/12/94) P. B9; Geyelin, Milo Governor William Weld of Massachusetts has signed a measure authorizing the state's attorney general to sue cigarette makers in an effort to recoup smoking-related Medicaid costs. Massachusetts taxpayers spent over $500 million on smoking-related health care in 1988, according to a spokesman for the state Department of Public Health. The state attorney general's office is looking into launching a suit under the new law. The Massachusetts provision doesn't explicitly ban tobacco companies from employing any of their traditional legal defenses, unlike a similar Florida law which is being challenged as unconstitutional. Philip Morris Cos. is challenging the Florida measure. Charles Wall, the company's vice president and associate general counsel, said he doesn't think Philip Morris will go after the Massachusetts law. "Teamsters Say They Won't Attend Philip Morris Meeting" Reuters (07/11/94) The International Brotherhood of Teamsters says they have informed Philip Morris Cos. Inc. that they will not be attending a special institu- tional shareholders meeting scheduled for Wednesday. Bart Naylor, national coordinator for public affairs, said that the Teamsters wouldn't attend the meeting because "they would not be able to assure us they would be able to have outside directors." Naylor says the Teamsters were also requesting the presence of former Chief Executive Hamish Maxwell. Philip Morris announced it would be represented by top management, including Chairman William Murray I