2000 vs. 1999			1999 vs. 1998
								As-Reported
(Dollar amounts in millions)	Years Ended December 31,				As-Reported	Pro Forma		% Increase
Net Revenue	2000	1999	1998		%Increase	% Increase		(Decrease)
Operating Segment:     Pharmaceuticals	$10,797.6	$ 9,505.9	$ 8,901.8		14%	15%		7%
Consumer Health Care	2,465.2	2,375.3	2,174.7		4%	4%		9%
	13,262.8	11,881.2	11,076.5		12%	13%		7%
Corporate and All Other*	-	-	192.1		-	-		(100)%
Consolidated Net Revenue	$13,262.8	$11,881.2	$11,268.6		12%	13%		5%
* Corporate and All Other, as-reported, for 1998 included the net revenue of the Company's divested medical devices business discussed above.

Worldwide pharmaceutical net revenue increased 14% on an as-reported basis and 15% (primarily human pharmaceuticals) on a pro forma basis for 2000. Excluding the negative impact of foreign exchange, pro forma worldwide pharmaceutical net revenue increased 19% for 2000. Pro forma U.S. pharmaceutical net revenue increased 22% for 2000 due primarily to higher sales of Prevnar (introduced in the 2000 first quarter), Effexor XR (as a result of higher volume and market share of new prescriptions, and expanded indications), Protonix (introduced in the 2000 second quarter), Premarin products, animal health products and alliance revenue offset, in part, by lower sales of Lodine (due to generic competition) and factor VIII.
    Pro forma international pharmaceutical net revenue increased 7% for 2000 due primarily to higher sales of Meningitec (introduced in the United Kingdom in the 1999 fourth quarter), Effexor XR (as a result of higher volume and market share of new prescriptions, and expanded indications) and ReFacto (introduced in the 1999 second quarter).
    Worldwide pharmaceutical net revenue increased 7% (9% for human pharmaceuticals) for 1999. Excluding the negative impact of foreign exchange, worldwide pharmaceutical net revenue increased 8% for 1999. U.S. pharmaceutical net revenue increased 7% for 1999 due primarily to higher sales of Enbrel (introduced in 1998), Effexor XR (due to increased selling efforts and expanded indications), Premarin products and Zosyn, which were offset, in part, by lower sales of animal health products, Naprelan and Verelan (divested in 1998), oral contraceptives and Cordarone (due to generic competition). Lower sales of animal health products were due primarily to customers reducing consumption of livestock-related animal health products, in part, as a result of continuing commodity price declines in the livestock markets.
    International pharmaceutical net revenue increased 6% for 1999 due primarily to higher sales of Effexor XR (due to increased selling efforts and expanded indications), Meningitec (introduced in the United Kingdom in the 1999 fourth quarter), ReFacto (introduced in the 1999 second quarter), Tazocin, HibTITER and Zoton.
    Worldwide consumer health care net revenue increased 4% on an as-reported and pro forma basis for 2000. Excluding the negative impact of foreign exchange, worldwide consumer health care net revenue increased 6% for 2000. U.S. consumer health care net revenue increased 4% for 2000 due primarily to higher sales of Centrum products (including Centrum Performance, which was launched in the United States in the 1999 fourth quarter), cough/cold/allergy products, Chap Stick and Flexagen (introduced in the United States in the 2000 second quarter).
    International consumer health care net revenue increased 3% for 2000 due primarily to higher sales of Centrum products and Caltrate offset, in part, by lower sales of Anacin.
    Worldwide consumer health care net revenue increased 9% for 1999. Excluding the negative impact of foreign exchange, worldwide consumer health care net revenue increased 11% for 1999. U.S. consumer health care net revenue increased 10% for 1999 due primarily to higher sales of Solgar products (acquired in 1998), Centrum products, cough/cold/allergy products, Chap Stick and Caltrate. Solgar products contributed 3% to the U.S. sales increase for 1999.
    International consumer health care net revenue increased 7% for 1999 due primarily to higher sales of Centrum products, Caltrate, Solgar products (acquired in 1998) and Advil. Solgar products contributed 3% to the international sales increase for 1999. The following table sets forth the percentage changes in pro forma worldwide net revenue by operating and geographic segment compared with the prior year, including the effect volume, price and foreign exchange had on these percentage changes:

	% Increase (Decrease) Year Ended December 31, 2000 (1)					% Increase (Decrease) Year Ended December 31, 1999 (2)
	Volume	Price	Foreign Exchange	Total Net Revenue		Volume	Price	Foreign Exchange	Total Net Revenue
Pharmaceuticals United States	15%	7%	-	22%		4%	3%	-	7%
International	14%	-	(7)%	7%		7%	3%	(4)%	6%
Total	15%	4%	(4)%	15%		5%	3%	(1)%	7%
Consumer Health Care(3) United States	3%	1%	-	4%		9%	1%	-	10%
International	5%	3%	(5)%	3%		8%	5%	(6)%	7%
Total	4%	2%	(2)%	4%		9%	2%	(2)%	9%
Total United States	12%	6%	-	18%		5%	3%	-	8%
International	13%	1%	(7)%	7%		7%	3%	(4)%	6%
Total	13%	3%	(3)%	13%		6%	3%	(2)%	7%
(1) Effective January 1, 2000, the financial results of certain subsidiaries in Japan and India, which previously were included on an equity basis, were consolidated in the results of the Company. Also effective January 1, 2000, the financial results of Immunex, which previously were consolidated in the results of the Company, were deconsolidated and included on an equity basis. Accordingly, alliance revenue was recorded in 2000 for co-promotion agreements between the Company and Immunex. The 2000 pro forma net revenue percentage changes reflect the respective consolidation and deconsolidation of these subsidiaries and include alliance revenue from Immunex, assuming all transactions occurred as of January 1, 1999. Neither the consolidation nor the deconsolidation of these subsidiaries, nor the inclusion of alliance revenue from Immunex, had any effect on income from continuing operations in 2000. (2) Net revenue results are presented after adjusting for the sale of the Sherwood-Davis & Geck medical devices business (effective February 27, 1998). (3) Solgar products contributed 3% to the U.S., international and total net revenue volume increases for 1999.

    Cost of goods sold, as a percentage of Net revenue, decreased slightly to 24.7% for 2000 compared with 25.4% for 1999. Excluding alliance revenue, cost of goods sold, as a percentage of sales, for 2000 was 25.0%, a 0.4% decrease from 1999. A favorable mix of higher margin products in the pharmaceuticals segment was offset, in part, by an increase in royalty expenses and costs associated with improving the production and supply chain processes at certain international sites. Cost of goods sold, as a percentage of Net revenue, increased slightly to 25.4% for 1999 compared with 25.2% for 1998 due primarily to an unfavorable product mix in both operating segments.
    Selling, general and administrative expenses, as a percentage of Net revenue, increased to 37.9% for 2000 compared with 36.9% for 1999. Higher selling, general and administrative expenses were due primarily to increased selling and marketing expenses supporting higher field sales headcount and salaries, promotional efforts for recent product launches and rapid growth products, and direct-to-consumer programs. The increase in the ratio of these expenses, as a percentage of Net revenue, was offset, in part, by deconsolidating Immunex in 2000 as these expenses carried a higher expense ratio, and consolidating Japan and India in 2000 as their expense ratio was lower than the Company overall.
    Selling, general and administrative expenses, as a percentage of Net revenue, decreased to 36.9% for 1999 compared with 37.4% for 1998. The expense ratio decreased as a result of the divestiture of the Sherwood-Davis & Geck medical devices business, as this business was more cost intensive. The decrease was offset, in part, by higher selling expenses related to certain pharmaceutical and consumer health care product launches in late 1998 and in 1999, pre-launch marketing costs for certain pharmaceutical products launched in 2000 and increased headcount to support new product initiatives.
    Research and development expenses increased 6% for 2000 due primarily to certain advancements and ongoing clinical trials of pharmaceuticals in several therapeutic categories, as well as additional payments for existing licensing agreements offset, in part, by lower costs as a result of deconsolidating Immunex in 2000. Research and development expenses increased 8% for 1999 due primarily to higher pharmaceutical research and development expenditures as a result of advanced clinical trials, discovery initiatives and license payments. Pharmaceutical research and development expenditures accounted for 96%, 95% and 94% of total research and development expenditures in 2000, 1999 and 1998, respectively. Pharmaceutical research and development expenses, as a percentage of worldwide pharmaceutical net revenue, exclusive of infant nutritional sales and alliance revenue, were 16%, 17% and 17% in 2000, 1999 and 1998, respectively.
    Interest expense, net decreased 73% for 2000 due primarily to an increase in interest income as a result of higher cash and cash equivalents, as well as lower debt resulting from the payoff of the $1,000.0 million of 7.70% notes on February 15, 2000. In addition, on June 30, 2000, the Company used a portion of the proceeds from the sale of the Cyanamid Agricultural Products business to pay down a substantial portion of the outstanding commercial paper borrowings.
    Interest expense, net increased 3% for 1999 due primarily to increased borrowings of commercial paper to finance purchases of common stock for treasury as part of the Company's common stock repurchase program offset, in part, by higher interest income and a reduction in long-term debt from the proceeds of the divestiture of the Sherwood-Davis & Geck medical devices business during the 1998 first quarter. Weighted average debt outstanding during 2000 and 1999 was $3,853.0 million and $4,889.0 million, respectively.
    Other income, net decreased 37% for 2000 due primarily to payments for various pharmaceutical collaborations, costs associated with a consent decree (described below), lower gains on the sales of nonstrategic assets and costs related to a product discontinuation offset, in part, by insurance recoveries of environmental costs, higher equity income (due to the deconsolidation of Immunex) and lower Year 2000 conversion costs. In conjunction with the consent decree identified above, the Company recorded a pre-tax charge of $56.1 million which included payments to the U.S. government and charges associated with actions required by the FDA based on an inspection of the Marietta, Pennsylvania, and Pearl River, New York, facilities. Pursuant to the consent decree, the Company will have a comprehensive inspection performed by expert consultants to determine compliance with current Good Manufacturing Practices.
    Other income, net decreased 11% for 1999 due primarily to lower gains on the sales of non-strategic assets, including certain non-core product rights offset, in part, by lower non-recurring charges and lower unfavorable foreign exchange results.

2000, 1999 and 1998 Unusual Transactions
During the 2000 first quarter, the Company and Warner-Lambert Company terminated their merger agreement. The Company recorded income of $1,709.4 million ($1,111.1 million after-tax or $0.85 per share-diluted) in income from continuing operations resulting from the receipt of a $1,800.0 million termination fee provided for under the merger agreement offset, in part, by certain related expenses (see Note 3 to the Consolidated Financial Statements).
    In November 2000, Immunex and the Company completed a joint public equity offering allowing the Company to sell 60.5 million shares of Immunex common stock. Proceeds to the Company were $2,404.9 million resulting in a gain on the sale of $2,061.2 million ($1,414.9 million after-tax or $1.08 per share-diluted). The Company used the net proceeds from the sale of its Immunex common stock to reduce outstanding commercial paper and for other general corporate purposes (see Note 2 to the Consolidated Financial Statements).
    In November 2000, in accordance with an FDA request, the Company immediately ceased global production and shipments of any products containing PPA and voluntarily withdrew any such products from customer warehouses and retail store shelves. As a result, the Company recorded a special charge of $80.0 million ($52.0 million after-tax or $0.04 per share-diluted) to provide primarily for product returns and the write-off of inventory (see Note 3 to the Consolidated Financial Statements).
    During the 2000 fourth quarter, the Company recorded a special charge of $267.0 million ($173.0 million after-tax or $0.13 per share-diluted) related to the discontinuation of certain products. The special charge provided for fixed asset impairments, inventory write-offs, severance obligations, idle plant costs and contract termination costs (see Note 3 to the Consolidated Financial Statements).
    At December 31, 2000, the Company performed goodwill and other intangible reviews and noted that projected profitability and future cash flows associated with generic pharmaceuticals and the Solgar consumer health care product line would not be sufficient to recover the remaining goodwill related to these product lines. As a result, the Company recorded a charge of $401.0 million ($341.0 million after-tax or $0.26 per share-diluted) to write down the carrying value of goodwill related to these product lines, to fair value, representing discounted future cash flows (see Note 3 to the Consolidated Financial Statements).
    During the 2000 fourth quarter, the Company recorded a charge of $7,500.0 million ($5,375.0 million after-tax or $4.11 per share-diluted) relating to the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin (see Note 10 to the Consolidated Financial Statements). An initial litigation charge of $4,750.0 million ($3,287.5 million after-tax or $2.51 per share-diluted) was recorded in the 1999 third quarter. The combination of these two charges represents the estimated total amount required to settle all diet drug litigation, including all anticipated payments in connection with the nationwide, class action settlement, payments to the approximately 40,000 opt out claimants with whom the Company has agreed to settle, and all anticipated payments to resolve the claims of the remaining approximately 10,000 opt outs and any PPH claimants, as well as all legal fees and other costs, net of insurance (see Note 10 to the Consolidated Financial Statements and the "Liquidity, Financial Condition and Capital Resources" section for further discussion relating to the Company's additional financing requirements for the future settlement payments).
    During the 1999 second quarter, the Company recorded a special charge aggregating $82.0 million ($53.0 million after-tax or $0.04 per share-diluted) for estimated costs associated with the suspension of shipments and the voluntary market withdrawal of RotaShield, the Company's rotavirus vaccine (see Note 3 to the Consolidated Financial Statements).
    In December 1998, the Company recorded a special charge for restructuring and related asset impairments of $321.2 million ($224.8 million after-tax or $0.17 per share-diluted) to recognize the costs of the reorganization of the pharmaceutical and nutritional supply chains (primarily in the Asian-Pacific and Latin American regions), the reorganization of the U.S. pharmaceutical and consumer health care distribution systems, and a reduction in personnel from the globalization of certain business units (see Note 3 to the Consolidated Financial Statements).
    In February 1998, the Company sold the Sherwood-Davis & Geck medical devices business (see Note 2 to the Consolidated Financial Statements) for approximately $1,770.0 million, resulting in a pre-tax gain of $592.1 million ($330.8 million after-tax or $0.25 per share-diluted).

Income (Loss) from Continuing Operations before Taxes
The following table sets forth worldwide income (loss) from continuing operations before taxes by operating segment together with the percentage changes from the comparable periods in the prior year on an as-reported basis:

(Dollar amounts in millions)	Years Ended December 31,				2000 vs. 1999 % Increase	1999 vs. 1998 % Increase
Income (Loss) from Continuing Operations before Taxes(1)	2000	1999	1998		(Decrease)
Operating Segment: Pharmaceuticals	$ 2,930.0	$ 2,554.6	$2,488.3		15%	3%
Consumer Health Care	616.1	578.6	509.7		6%	14%
	3,546.1	3,133.2	2,998.0		13%	5%
Corporate and All Other (2)	(4,647.1)	(5,040.5)	91.9		(8)%	-
Total (3)	$(1,101.0)	$(1,907.3)	$3,089.9		(42)%	-
(1) Income (loss) from continuing operations before taxes included goodwill amortization for 2000, 1999 and 1998 as follows: Pharmaceuticals -$147.8, $154.3 and $158.2, and Consumer Health Care -$31.8, $32.7 and $22.6, respectively, and Corporate and All Other -$0.9 in 1998. (2) 2000 and 1999 Corporate and All Other included litigation charges of $7,500.0 and $4,750.0, respectively, relating to the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin. The charges provide for all anticipated payments in connection with the nationwide, class action settlement, payments to the approximately 40,000 opt out claimants with whom the Company has agreed to settle, and all anticipated payments to resolve the claims of the remaining approximately 10,000 opt outs and any PPH claimants, as well as all legal fees and other costs, net of insurance. 2000 Corporate and All Other included: Income of $1,709.4 resulting from the receipt of a $1,800.0 termination fee provided for under the merger agreement with Warner-Lambert Company offset, in part, by certain related expenses. Income of $2,061.2 related to the Company selling a portion of its investment in Immunex common stock in a joint public equity offering with Immunex. Goodwill impairment of $401.0 related to the goodwill associated with generic pharmaceuticals and the Solgar consumer health care product line. A special charge of $80.0 related to the voluntary ceasing of production and subsequent market withdrawal of products containing PPA. A special charge of $267.0 related to costs associated with certain product discontinuations. 1999 Corporate and All Other included a special charge of $82.0 related to the suspension of shipments and the voluntary market withdrawal of RotaShield, the Company's rotavirus vaccine. 1998 Corporate and All Other included a special charge for restructuring and related asset impairments of $321.2. 1998 Corporate and All Other included the gain on the sale of the Sherwood-Davis & Geck medical devices business of $592.1. Excluding the 2000 termination fee, 2000 and 1999 litigation charges, 2000 gain on the sale of Immunex common stock, 2000 goodwill impairment, 2000, 1999 and 1998 special charges, and 1998 gain on the sale of the Sherwood-Davis & Geck medical devices business from 2000, 1999 and 1998 results, Corporate and All Other expenses, net decreased 19% for 2000 and increased 16% for 1999. (3) Excluding the 2000 termination fee, 2000 and 1999 litigation charges, 2000 gain on the sale of Immunex common stock, 2000 goodwill impairment, 2000, 1999 and 1998 special charges, and 1998 gain on the sale of the Sherwood-Davis & Geck medical devices business from 2000, 1999 and 1998 results, total income from continuing operations before taxes increased 15% for 2000 and 4% for 1999.

    The following explanations of changes in income (loss) from continuing operations before taxes, by operating segment, for 2000 compared with 1999, and 1999 compared with 1998, exclude items listed in footnote (2) to the table above.
    Worldwide pharmaceutical income from continuing operations before taxes increased 15% (11% for human pharmaceuticals) for 2000 due primarily to higher worldwide net revenue (including alliance revenue) offset, in part, by higher selling, general and administrative expenses, research and development expenses, and other expenses (primarily collaboration payments and costs for a consent decree). Higher selling, general and administrative expenses were due primarily to increased media and promotional expenses to support product launches and existing product lines through increased headcount.
    Worldwide pharmaceutical income from continuing operations before taxes increased 3% (9% for human pharmaceuticals) for 1999 due primarily to higher worldwide sales offset, in part, by higher selling, general and administrative expenses, higher research and development expenses, lower gains on the sales of non-strategic assets and an unfavorable product mix. Higher selling, general and administrative expenses for worldwide pharmaceuticals for 1999 were the result of higher selling expenses related to certain product launches in late 1998 and in 1999, pre-launch marketing costs for certain products expected to be launched in 2000 and increased headcount to support new product initiatives.
    Worldwide consumer health care income from continuing operations before taxes increased 6% for 2000 due primarily to higher worldwide sales. Worldwide consumer health care income from continuing operations before taxes increased 14% for 1999 due primarily to higher worldwide sales, which were offset, in part, by higher selling, general and administrative expenses.
    Corporate and All Other expenses, net decreased 19% for 2000 due primarily to lower interest expense, net and increased current year insurance recoveries related to environmental costs offset, in part, by lower gains on sales of non-strategic assets, higher general and administrative expenses, and costs related to a product discontinuation.
    Corporate and All Other expenses, net increased 16% for 1999 due primarily to higher general and administrative expenses, the loss of the Sherwood-Davis & Geck medical devices business operating profit and lower gains on sales of non-strategic assets, which were offset, in part, by lower one-time charges.
    The effective tax rate for 2000, excluding the effect of the 2000 termination fee, 2000 gain on the sale of Immunex common stock, and the 2000 and 1999 litigation charges, was 25.9% which is comparable to the 26.8% effective tax rate for 1999.
    The effective tax rate, excluding the effect of the 1999 litigation charge, for 1999 was 26.8% compared with 30.3% for 1998. The effective tax rate decreased in 1999 due primarily to an increased benefit from products manufactured in lower taxed jurisdictions and basis differences for tax and financial reporting purposes, primarily goodwill, on the sale of the Sherwood-Davis & Geck medical devices business and sales of certain other non-core assets in 1998.

Income (Loss) and Diluted Earnings (Loss) per Share from Continuing Operations
Loss and diluted loss per share from continuing operations in 2000 were $901.0 million and $0.69, respectively, compared with $1,207.2 million and $0.92 in 1999, respectively. Income and diluted earnings per share from continuing operations in 1998 were $2,152.3 million and $1.61, respectively. The income (loss) from continuing operations for 2000, 1999 and 1998 included the following unusual items:

(In millions except per share amounts)	Income (Loss) from Continuing Operations				Diluted Earnings (Loss) per Share from Continuing Operations
Years Ended December 31,	2000	1999	1998		2000	1999	1998
Income from continuing operations before     unusual items and including the dilutive     effect of common share equivalents (CSE)	$ 2,514.0	$ 2,133.3	$2,046.3		$ 1.90	$ 1.61	$ 1.53
Dilutive effect of CSE *	-	-	-		.02	0.02	-
	$ 2,514.0	$ 2,133.3	$2,046.3		$ 1.92	$ 1.63	$ 1.53
Warner-Lambert Company termination fee	1,111.1	-	-		0.85	-	-
Gain on sale of Immunex common stock	1,414.9	-	-		1.08	-	-
Gain on sale of Sherwood-Davis & Geck medical devices business	-	-	330.8		-	-	0.25
Redux and Pondimin diet drug litigation charges	(5,375.0)	(3,287.5)	-		(4.11)	(2.51)	-
Goodwill impairment	(341.0)	-	-		(0.26)	-	-
Special charges:    Voluntary market withdrawals	(52.0)	(53.0)	-		(0.04)	(0.04)	-
Product discontinuations	(173.0)	-	-		(0.13)	-	-
Restructuring charge	-	-	(224.8)		-	-	(0.17)
Income (loss) from continuing operations	$ (901.0)	$(1,207.2)	$2,152.3		$(0.69)	$(0.92)	$ 1.61
* The $0.02 per share benefit represents the impact on income from continuing operations of excluding the dilutive effect of CSE.

    For further details related to the items listed in the table above, refer to the discussion of "2000, 1999 and 1998 Unusual Transactions", herein.
    Excluding all unusual items listed in the table above and including the $0.02 per share dilutive effect of common share equivalents in 2000 and 1999 results, both income and diluted earnings per share from continuing operations in 2000 increased 18% compared with 1999. The increases were due primarily to additional worldwide sales of pharmaceuticals and lower interest expense offset, in part, by higher selling, general and administrative expenses and research and development expenses.
    Excluding all unusual items listed in the table above in 1999 and 1998 and including the $0.02 per share dilutive effect of common share equivalents in 1999 results, income and diluted earnings per share from continuing operations for 1999 increased 4% and 5%, respectively, compared with 1998. The increases were due primarily to increased sales of pharmaceuticals and consumer health care products offset, in part, by higher pharmaceutical research and development expenses and the loss of the Sherwood-Davis & Geck medical devices business operating profit.
    Discontinued operations: On June 30, 2000, the Company announced that it had completed the sale of the Cyanamid Agricultural Products business to BASF. Under the terms of the definitive agreement, BASF paid the Company $3,800.0 million in cash and assumed certain debt. As a result, the Company recorded an after-tax loss on the sale of this business of $1,573.0 million or $1.20 per share-diluted and reflected this business as a discontinued operation beginning in the 2000 first quarter and restated all prior periods presented (see Note 2 to the Consolidated Financial Statements).

Euro Currency

As of January 1, 2001, 12 of the 15 member countries of the European Union adopted the Euro as a new common legal currency. However, the legacy currencies of the member countries are scheduled to remain legal tender as sub-denominations of the Euro between January 1, 1999 and January 1, 2002 (the transition period). Critical areas impacted by the conversion to the Euro have been identified and appropriate strategies developed, which currently are being implemented to facilitate the adoption of the Euro and to facilitate business transactions during the transition period. The costs related to the Euro conversion and transition period will not have a material adverse effect on the Company's financial position, results of operations or cash flows. However, the conversion to the Euro may have competitive implications on the Company's pricing and marketing strategies, the total impact of which is not known at this time.

Competition

The Company operates in the highly competitive pharmaceutical and consumer health care industries. The Company is not dependent on any one patent-protected product or line of products for a substantial portion of its net revenues or results of operations. Premarin, the Company's principal conjugated estrogens product manufactured from pregnant mare's urine, and related products Prempro and Premphase (which are single tablet combinations of the conjugated estrogens in Premarin and the progestin medroxyprogesterone acetate), are the leaders in their categories and contribute significantly to net revenue and results of operations. Premarin's natural composition is not subject to patent protection (although Prempro has patent protection). The principal uses of Premarin, Prempro and Premphase are to manage the symptoms of menopause and to prevent osteoporosis, a condition involving a loss of bone mass in postmenopausal women. Estrogen-containing products manufactured by other companies have been marketed for many years for the treatment of menopausal symptoms, and several of these products also have an approved indication for the prevention of osteoporosis. During the past several years, other manufacturers have introduced products for the treatment and/or prevention of osteoporosis. New products containing different estrogens than those found in Prempro and Premphase and having many forms of the same indications have also been introduced. Some companies have attempted to obtain approval for generic versions of Premarin. These products, if approved, would be routinely substitutable for Premarin and related products under many state laws and third-party insurance payer plans. In May 1997, the FDA announced that it would not approve certain synthetic estrogen products as generic equivalents of Premarin given known compositional differences between the active ingredient of these products and Premarin. Although the FDA has not approved any generic equivalent to Premarin to date, Premarin will continue to be subject to competition from existing and new competing estrogen and other products for its approved indications and may be subject to generic competition from either synthetic or natural conjugated estrogens products in the future. At least one other company has announced that it is in the process of developing a generic version of Premarin from the same natural source, and the Company currently cannot predict the timing or outcome of these or any other efforts.

Liquidity, Financial Condition and Capital Resources

Cash and cash equivalents increased $751.6 million in 2000 to $2,644.3 million. Cash flows from operating activities of $554.9 million (which included a termination fee, net of certain related expenses, received from Warner-Lambert Company of $1,709.4 million and payments related to the Redux and Pondimin litigation of $3,966.8 million), proceeds from the sale of the Cyanamid Agricultural Products business of $3,800.0 million, proceeds from the sale of Immunex common stock of $2,404.9 million, proceeds from exercises of stock options of $410.9 million, proceeds from the sales and maturities of marketable securities of $384.3 million, and proceeds from the sales of assets of $256.2 million were used principally for net repayments of debt of $3,080.4 million, capital expenditures of $1,681.9 million, dividend payments of $1,201.5 million, purchases of marketable securities of $677.8 million and purchases of common stock for treasury of $393.1 million.
    Capital expenditures were significant in 2000 due primarily to strategic investments in manufacturing facilities worldwide, and the expansion of the Company's research and development facilities to support new product franchises (primarily biotechnology based) and the expansion of existing brand products. This level of capital expenditures is expected to continue in 2001.
    At December 31, 2000, the carrying value of cash equivalents approximated fair value due to the short-term, highly liquid nature of cash equivalents, which have original maturities of three months or less. Interest rate fluctuations would not have a significant effect on the fair value of cash equivalents held by the Company.
    As discussed in Note 10 to the Consolidated Financial Statements, on October 7, 1999, the Company announced a nationwide, class action settlement to resolve litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin. As of December 31, 2000, the Company had recorded charges totaling $12,250.0 million to provide for all anticipated payments in connection with the nationwide, class action settlement, payments to the approximately 40,000 opt out claimants with whom the Company has agreed to settle, and all anticipated payments to resolve the claims of the remaining approximately 10,000 opt outs and any PPH claimants, as well as all legal fees and other costs, net of insurance. Payments to the nationwide, class action settlement funds, individual settlement payments, legal fees and other costs were $3,966.8 million and $117.6 million for 2000 and 1999, respectively. Payments to provide settlement benefits, if needed, may continue for approximately 16 years after final judicial approval. Payments made to date and future payments related to the diet drug litigation are anticipated to be financed through existing cash resources, cash flows from operating activities, additional commercial paper borrowings supported by expanded credit facilities obtained in March 2001, as well as term debt financings and international earnings remitted back to the United States, if necessary.
    On February 15, 2000, the Company repaid its $1,000.0 million of 7.70% notes. Throughout 2000, the Company used portions of the Warner-Lambert Company termination fee and proceeds from the sale of the Cyanamid Agricultural Products business and sale of Immunex common stock to reduce outstanding term debt and commercial paper.
    The $2,000.0 million five-year credit facility, which has a maturity date of July 31, 2002, had no outstanding balance at December 31, 2000. In March 2001, the Company obtained new revolving credit facilities totaling $6,000.0 million to support its commercial paper program. The credit facilities are composed of a $3,000.0 million 364-day facility with an option to extend the term of any borrowings, under the facility, for an additional year and a $3,000.0 million 364-day bridge facility to capital markets, which will be terminated upon the issuance of term debt by the Company during 2001.
    The Company has outstanding $1,000.0 million of 7.90% notes due February 2005. The Company also has outstanding $250.0 million of 6.50% notes due October 2002 and $250.0 million of 7.25% debentures due March 2023. These non-callable notes and debentures are unsecured and unsubordinated.
    The Company has a common stock repurchase program under which the Company is authorized, at December 31, 2000, to repurchase 6,492,460 additional shares in the future. Depending upon market conditions, among other things, the Company may make limited repurchases of its common stock to offset stock issuances in connection with exercises of stock options during 2001.
    Management is confident that cash flows from operating activities and available debt financing resources, including the expanded credit facilities obtained in March 2001, will be adequate to fund the Company's operations, pay opt out settlement payments and the nationwide, class action settlement relating to the Redux and Pondimin litigation, pay dividends, maintain its ongoing programs of capital expenditures, including the amount already committed at December 31, 2000 of $894.0 million, and to repay both the principal and interest on its outstanding obligations, without requiring the disposition of any significant strategic core businesses.

Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates that could impact its financial condition, results of operations and cash flows. The Company manages its exposure to these market risks through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments as risk management tools and not for trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage the Company's exposure to non-performance on such instruments.
    Foreign Currency Risk Management: The Company generates a portion of Net revenue from sales to customers located outside the United States, principally in Europe. International sales are made mostly from international subsidiaries in the local countries and are typically denominated in the local currency of the respective country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, most international subsidiaries use the local currency as their functional currency. International business, by its nature, is subject to risks including, but not limited to: differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, future results could be adversely impacted by changes in these or other factors.
    The Company has established programs to protect against adverse changes in exchange rates due to foreign currency volatility. At December 31, 2000, the fair value of the $558.8 million notional amount of foreign exchange forward contracts was a net receivable of $3.4 million. If the value of the U.S. dollar were to increase or decrease by 10% in relation to all hedged foreign currencies, the net receivable would decrease or increase by approximately $35.5 million.
    The Company believes that the foreign currency risks to which it is exposed are not reasonably likely to have a material adverse effect on the Company's financial position, results of operations or cash flows due to the high concentration of sales in the United States. No single foreign currency accounted for more than 5% of 2000 or 1999 worldwide net revenue, except for the British Pound, which accounted for 7% and 6% of 2000 and 1999 worldwide net revenue, respectively. As previously discussed, 12 member countries of the European Union adopted the Euro as a new common legal currency. However, the legacy currencies of the member countries are scheduled to remain legal tender as sub-denominations of the Euro until January 1, 2002. Collectively, these countries accounted for 11% and 13% of 2000 and 1999 worldwide Net revenue, respectively.
    Interest Rate Risk Management: The fair value of the Company's fixed-rate long-term debt is sensitive to changes in interest rates. Interest rate changes would result in gains/losses in the market value of this debt due to differences between the market interest rates and rates at the inception of the debt obligation. At December 31, 2000, the fair value of the Company's outstanding debt was $2,506.6 million. If interest rates were to increase or decrease by one percentage point, the fair value of the outstanding debt would decrease or increase by approximately $72.7 million. Management does not expect any significant changes in its exposure to interest rate fluctuations or in how such exposure is managed in the near future.

Enbrel Supply

Although the market demand for Enbrel is increasing, the sales growth is currently constrained by limits on the existing source of supply. This is expected to continue until the retrofitting of a Rhode Island facility is completed and approved, which is expected to occur in 2002. If the market demand continues to grow, there may be further supply constraints even after the Rhode Island facility begins producing Enbrel. The current plan for the longer term includes a new manufacturing facility, which is being constructed in Ireland.

Cautionary Statements for Forward-Looking Information

This Annual Report, including management's discussion and analysis set forth above, contains certain forward-looking statements, including, among other things, statements regarding the Company's results of operations, Euro currency, competition, liquidity, financial condition and capital resources, Enbrel supply, foreign currency and interest rate risk, the nationwide, class action settlement relating to Redux and Pondimin, and additional litigation charges related to Redux and Pondimin including those for opt outs. These forward-looking statements are based on current expectations. Certain factors which could cause the Company's actual results to differ materially from expected and historical results have been identified by the Company in Exhibit 99 to the Company's 1999 Annual Report on Form 10-K and the Company's 2000 Annual Report on Form 10-K, which will be filed by April 2, 2001.