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SECURITIES AND EXCHANGE COMMISSION

Item 1. BUSINESS

Bristol-Myers Squibb Company ("Bristol-Myers Squibb" or the "Company") was incorporated under the laws of the State of Delaware in August 1933 under the name Bristol-Myers Company as successor to a New York business started in 1887. In 1989, the Bristol-Myers Company changed its name to Bristol-Myers Squibb Company, as a result of a merger. The Company, through its divisions and subsidiaries, is a major producer and distributor in one significant business segment - medicines. Operations of the Nutritional and ConvaTec businesses are not material to the financial statements. In general, the business of the Company is not seasonal.

On September 28, 2000, the Company announced the planned divestiture of its Clairol and Zimmer businesses in 2001. The Company announced on February 22, 2001 its intention to separate the Zimmer business in a tax-free spin-off to shareholders. Completion is expected by the end of the third quarter of 2001. Accordingly, the operations of these businesses have been reflected as discontinued operations in the financial statements.

Sales of selected products and product categories from continuing operations are as follows:

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Item 3. LEGAL PROCEEDINGS.

Various lawsuits, claims and proceedings of a nature considered normal to its businesses are pending against the Company and certain of its subsidiaries. The most significant of these are described below.

Reference is made to Note 17 Litigation in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Report.

Breast Implant Litigation

The Company, together with its subsidiary, Medical Engineering Corporation (MEC), and certain other companies, has been named as a defendant in a number of claims and lawsuits alleging damages for personal injuries of various types resulting from polyurethane-covered breast implants and smooth-walled breast implants formerly manufactured by MEC or a related Company. Of the more than 90,000 claims or potential claims against the Company in direct lawsuits or through registration in the nationwide class action settlement approved by the Federal District Court in Birmingham, Alabama (the "Revised Settlement"), most have been dealt with through the Revised Settlement, other settlements, or trial. As of December 31, 2000, the Company's contingent liability in respect of breast implant claims was limited to residual unpaid Revised Settlement obligations and to roughly 850 remaining opt-outs who have pursued or may pursue their claims in court.

As of December 31, 2000, approximately 4,790 United States and 310 foreign breast implant recipients were plaintiffs in lawsuits pending in federal and state courts in the United States and certain courts in Canada and Australia. These figures include the claims of plaintiffs that are in the process of being settled and/or dismissed. In these lawsuits, about 2,140 US and 68 foreign plaintiffs opted out of the Revised Settlement. The lawsuits of the 2,650 US plaintiffs who did not opt out are expected to be dismissed since these plaintiffs are among the estimated 74,000 women with MEC implants who chose to participate in the nationwide settlement. Of the 2,140 opt-out plaintiffs, an estimated 1,290 have claims based upon products that were not manufactured or sold by MEC or that have been or are in the process of being settled and/or dismissed. Accordingly, the number of remaining plaintiffs who have pursued or may pursue their claims in court against the Company is roughly 850, as stated in the preceding paragraph.

Under the terms of the Revised Settlement, additional opt-outs are expected to be minimal since the deadline for US class members to opt out has passed. In addition, the Company's remaining obligations under the Revised Settlement Program are limited because most payments to "Current Claimants" have already been made, no additional "Current Claims" may be filed without court approval, and because payments of claims to so-called "Other Registrants" and "Late Registrants" are limited by the terms of the Revised Settlement. Separate class action settlements have been approved in the provincial courts of Ontario and Quebec, and an agreement has been reached under which other foreign breast implant recipients may settle their claims. The Company believes it will be able to address remaining opt-out claims as well as expected remaining obligations under the Revised Settlement Program within its reserves described below.

Breast implants were manufactured by several companies, including MEC, which the Company acquired in 1982. Until 1991, MEC manufactured two types of breast implants, polyurethane-covered silicone breast implants and smooth-walled silicone breast implants. In these lawsuits, plaintiffs typically contend that silicone in breast implants causes systemic disease and/or local complications. Some plaintiffs with polyurethane-covered silicone implants contend that the polyurethane component causes injury, including cancer. Most of the disease claims involve non-specific complaints such as chronic fatigue, aches and pains and other symptoms that commonly affect the population at large. Many women claim local complications such as rupture, hardening or contracture, and disfigurement or scarring. The plaintiffs typically seek compensatory damages for alleged medical conditions and emotional distress as well as punitive damages. The defendants have based their defense in part on the lack of credible scientific evidence that breast implants cause disease. Many large-scale epidemiological studies have found no connection between breast implants and the alleged diseases. Defendants also contend that warnings set forth in the product literature adequately advised physicians and surgeons of the risks of local complications.

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The Company is a participant in the national class action Revised Settlement Program approved on December 22, 1995, by the federal court in Alabama (Lindsey, et al., v. Dow Corning, et al., CV-94-P-11558-S), before which all federal breast implant cases were consolidated for pretrial purposes. On January 16, 1996, the Company, Baxter Healthcare Corporation and Baxter International (collectively, Baxter), and Minnesota, Mining and Manufacturing Company (3M) (hereinafter, the Settling Defendants) each paid $125 million into a court-established fund as an initial reserve to pay claims under the Revised Settlement. The Company has made and will make additional contributions to the court-established fund.

The fifteen-year Revised Settlement, which ends on December 15, 2010, provides benefits to those US breast implant recipients who have had at least one breast implant manufactured by one of the Settling Defendants (or their related companies). For Current Claimants - those who submitted the proper documentation to the Claims Office in Houston by the 1994 deadline - benefits are payable regardless of the number of claimants seeking compensation, and regardless of the total dollar value of approved claims. For Other and Late Registrants - those who registered with the Claims Office after the Current Claimant deadline - benefits are subject to an aggregate $725 million limit for the three Settling Defendants over the fifteen-year life of the program. The Company's individual aggregate limit for such benefits is $400 million, $27.6 million annually for the first ten years, and $24.8 million annually for the last five years. Amounts unused in one year may be rolled over to pay claims in ensuing years. In the event the dollar value of the claims subject to these limits were to exceed the amounts available to pay claims, claimants may be afforded additional opt-out rights but without the right to assert punitive or other statutory multiple damage claims. The Company's obligations to make payments under the Revised Settlement are not affected by the number of class members electing to opt out of the settlement or the number of class members making claims under it except to the extent of the above-mentioned dollar limits.

In addition to individual suits and the Lindsey class action, the Company is a defendant, together with other defendants, in a class action certified on April 11, 1996, in the Canadian province of British Columbia, on the single issue of whether silicone gel breast implants are reasonably fit for their intended purpose (Harrington v. Dow Corning Corporation et al., Supreme Court, British Columbia, C954330). On March 31, 2000, the federal government filed a civil suit in federal court in Birmingham, Alabama, against several parties in the breast implant litigation, including the Company. The government claims it is entitled to reimbursement for certain costs allegedly incurred in connection with the medical treatment provided to women with breast implants. The Company believes it will be able to address the government lawsuit within its reserves as described below.

The Company entered into several other settlements of breast implant-related claims. In July of 1995, the Company entered into a $20.5 million (US funds) class action settlement with plaintiff representatives in the provinces of Ontario and Quebec. The class includes persons who have or had MEC breast implants and who reside in Ontario

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and Quebec or who received their MEC implants there. The settlement, which had minimal opt-outs, was approved by the provincial courts of Ontario and Quebec. In May of 1996, the Company, together with other Settling Defendants in the Revised Settlement Program, entered into a $50 million settlement of claims asserted by certain health insurers based upon payments made or benefits provided by insurers and represented health plans to participating registrants that allegedly involve or relate to silicone gel breast implants. The Company has contributed $22.5 million to the settlement which extinguished the potential claims of the majority of the US commercial and non-governmental health care insurer market against both the defendants and settlement class members. In November 1996, the benefits of the Revised Settlement were extended, with certain modifications, to foreign breast implant recipients. The Company paid roughly $5.3 million into a court-approved fund in settlement of these claims.

The Company's insurers were notified of the breast implant claims and the Revised Settlement, and a number reserved their rights or declined coverage. The Company reached settlement with many of these insurers in connection with coverage litigation filed by it in state court in Texas. In 1993, the Company offset its breast implant product liability special charges by $1.0 billion of expected insurance proceeds (recorded as Insurance Recoverable). Because of its belief that additional amounts of insurance proceeds above that amount will be recovered, the Company recorded an additional Insurance Recoverable in the fourth quarter of 1998 of approximately $100 million. As a result of certain settlements, the Company has recovered or reached agreements to recover the $1.1 billion offset amount.

While there have been a few large judgments, defendants have won more trials than they have lost, and the Company's trial experience has been mostly favorable. The Company has maintained throughout this litigation that breast implants do not cause disease, and medical and scientific data support the Company's position. The Company's view has found support in the trial courts. Courts in several states have ruled to exclude the testimony of plaintiffs' experts concerning a causal link between silicone gel breast implants and systemic illness on the ground that it fails to satisfy standards for reliability under current US Supreme Court guidelines. In 1998, a national science panel of four independent experts appointed by the federal court issued its unanimous report, based on a comprehensive review of the medical and scientific literature, that there is no evidence linking silicone breast implants and systemic disease. Similarly, in 1999, the Institute of Medicine of the National Academy of Sciences - while commenting that the frequency of local injuries is greater than expected - concluded there is insufficient evidence to link silicone breast implants with disease. The Company intends to dispose of the claims of remaining opt-outs by continuing to implement its plan to settle cases at values it deems acceptable, and to wage a vigorous defense, including taking cases to trial, of those cases that do not settle at such values.

In the fourth quarter of 1993, the Company recorded a charge of $500 million before taxes ($310 million after taxes) in respect of breast implant cases. The charge consisted of $1.5 billion for potential liabilities and expenses, offset by $1.0 billion of expected insurance proceeds. In the fourth quarters of 1994 and 1995, the Company recorded additional special charges of $750 million before taxes ($488 million after taxes) and $950 million before taxes ($590 million after taxes), respectively, related to breast implant product liability claims. In the fourth quarter of 1998, the Company recorded an additional special charge to earnings in the amount of $800 million before taxes and increased its insurance receivable in the amount of $100 million, resulting in a net charge to earnings of $433 million after taxes in respect of breast implant product liability claims.

TAXOL* Litigation

In 1997 and 1998, the company filed several lawsuits alleging that a number of generic drug companies infringed its patents covering methods of administering paclitaxel when they filed abbreviated new drug applications seeking regulatory approval to sell paclitaxel. These actions were consolidated for discovery in the United States District Court for the District of New Jersey. The company does not assert a monetary claim against any of the defendants, but seeks to prevent the defendants from marketing paclitaxel in a manner that violates the company's patents.

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The defendants have asserted that they do not infringe the company's patents and that these patents are invalid and unenforceable. Some defendants also asserted counterclaims seeking damages for alleged antitrust and unfair competition violations. The company believes its patents are valid and the counterclaims asserted are without merit.

On January 4, 2000, the District Court granted the company's motion to dismiss certain of the antitrust and unfair competition counterclaims. The company's motion for summary judgment on the remaining antitrust and unfair competition counterclaims was denied on March 17, 2000. On February 29, 2000, the District Court granted in part the generic companies' summary judgment motions for invalidity by finding all claims of the Company's patents invalid, except for claims limited to the treatment of ovarian cancer. The District Court's opinion left for determination at trial the validity of the claims of the Company's patents directed to the low dose, three-hour administration of paclitaxel for ovarian cancer and denied the generic companies' summary judgment motion arguing non-infringement of the Company's patents.

In order to pursue an immediate appellate review of the District Court's invalidity findings, the Company voluntarily relinquished all rights in the remaining ovarian tumor specific claims of its patents. On April 7, 2000, the District Court granted the company's request for an entry of judgment. The Company's appeal of the District Court's judgment is pending before the Federal Circuit Court of Appeals. If the company is successful on appeal and the trial that would follow a successful appeal, the company believes its remaining patent rights would apply to all tumor types.

In September 2000, one of the defendants received final approval from the United States Food and Drug Administration for its Abbreviated New Drug Application (ANDA) for paclitaxel and is marketing the product. FDA approvals of additional ANDAs for paclitaxel can occur at any time beginning in April 2001.

It is not possible at this time to make a reasonable assessment of the outcome of the appeal and the remaining claims in these actions nor to reasonably estimate the impact on TAXOL* sales or the amount of damages were the company not to prevail.

VANLEV* Litigation

The Company, its Chairman of the Board and Chief Executive Officer, Charles A. Heimbold, Jr. and its Chief Scientific Officer and President - Pharmaceutical Research Institute, Peter S. Ringrose, Ph.D., are defendants in a number of purported class actions filed in the US District Court for the District of New Jersey in April, May and June 2000 alleging violations of federal securities laws and regulations. Plaintiffs claim that the defendants disseminated materially false and misleading statements and failed to disclose information concerning the safety and expected availability of its product VANLEV* during the period November 8, 1999 through April 19, 2000. Plaintiffs seek compensatory damages and costs and expenses.

It is not possible at this time to make a reasonable assessment of the outcome of this matter or the amount of damages were the Company not to prevail.

Environmental Matters

The Company, together with others, is a party to, or otherwise involved in, a number of proceedings brought by the Environmental Protection Agency or comparable state agencies under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) or comparable state laws directed at the cleanup of hazardous waste sites.

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While it is not possible to predict with certainty the outcome of these cases, it is the opinion of management that they will not have a material adverse effect on the Company's operating results, liquidity or consolidated financial position.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

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PART IA

EXECUTIVE OFFICERS OF THE REGISTRANT

The following are the executive corporate officers and the other executive officers of the Company:

Persons who hold titles as elected corporate officers of the Company were last elected or reelected to the office held at the general election of officers by the Company's Board of Directors on May 2, 2000 unless otherwise indicated. Officers of the Company serve in such capacity at the pleasure of the Board of Directors of the Company.

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CHARLES A. HEIMBOLD, JR. - From 1992 to 1996, President of the Company. Mr. Heimbold has been a director of the Company since 1989, the Chief Executive Officer of the Company since 1994 and Chairman of the Board of Directors of the Company since 1995.

HARRISON M. BAINS, JR. - Mr. Bains has been Treasurer and Vice President, Corporate Staff of the Company since 1988.

PETER R. DOLAN - From 1995 to 1996, President, Mead Johnson Nutritional Group, a division of the Company, from 1996 to 1997, President, Nutritionals and Medical Devices Group, a division of the Company and from 1997 to 1998, President, Pharmaceutical Group - Europe, a division of the Company, and from 1998 to 2000, Senior Vice President, Strategy and Organizational Effectiveness, Corporate Staff. From 2000 to the present, Mr. Dolan has been President of the Company, a Director of the Company, a member of the Office of the Chairman and Chairman of the Corporate Operating Committee. In addition, Mr. Dolan was named Chief Executive Officer-Designate earlier this year. He will be the Chief Executive Officer of the Company on May 1, 2001.

DONALD J. HAYDEN, JR. - From 1995 to 1997, Senior Vice President, Worldwide Franchise Management and Business Development, a division of the Company, in 1997, President, Intercontinental Pharmaceutical Group and Senior Vice President, Worldwide Business Development, Worldwide Medicines Group, a division of the Company, from 1997 to 1998, President, Intercontinental, Worldwide Medicines Group, a division of the Company, from 1998-2000, President, Worldwide Medicines Group, a division of the Company. Mr. Hayden has been Executive Vice President of the Company and a member of the Office of the Chairman and Corporate Operating Committee since 2000.

GEORGE P. KOOLURIS - Mr. Kooluris has been Senior Vice President, Corporate Development, Corporate Staff of the Company since 1994.

RICHARD J. LANE - From 1995 to 1997, Senior Vice President Marketing, US Pharmaceuticals, a division of the Company, in 1997, President, US Primary Care, a division of the Company, from 1997 to 1998, President, US Pharmaceuticals, a division of the Company, and from 1998 to 2000, President, US Medicines and Global Pharmaceutical Group, a division of the Company. Mr. Lane has been President, Worldwide Medicines Group, a division of the Company, and a member of the Office of the Chairman and Corporate Operating Committee since 2000.

SANDRA LEUNG - From 1994 to 1996, Senior Staff Attorney, Corporate Staff of the Company, from 1996 to 1997, Assistant Counsel, Corporate Staff of the Company, from 1997 to 1999, Associate Counsel, 1999, Counsel, Corporate Staff of the Company. Ms. Leung has been Secretary, Corporate Staff of the Company, and Head of the Office of Corporate Conduct since 1999.

JOHN L. McGOLDRICK - From 1995 to 1997, General Counsel and Senior Vice President, Corporate Staff of the Company and from 1997 to 1998, General Counsel and Senior Vice President, Law and Strategic Planning, Corporate Staff of the Company, and General Counsel and Senior Vice President, Corporate Staff of the Company and President, Medical Devices Group, a division of the Company, since 1998. Mr. McGoldrick has been Executive Vice President and General Counsel of the Company, President, Medical Devices Group, a division of the Company, and a member of the Office of the Chairman and Corporate Operating Committee since 2000.

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MICHAEL F. MEE - From 1994 to 2000, Chief Financial Officer and Senior Vice President, Corporate Staff of the Company. Mr. Mee has been Executive Vice President and Chief Financial Officer, Corporate Staff of the Company and a member of the Office of the Chairman and Corporate Operating Committee since 2000.

PETER S. RINGROSE, Ph.D. - From 1994 to 1996, Senior Vice President, Worldwide Discovery and Medicinal Research Development, Europe of Pfizer Inc., a health care company. From 1997-2000, President, Bristol-Myers Squibb Pharmaceutical Research Institute, a division of the Company. Dr. Ringrose has been Chief Scientific Officer of the Company and a member of the Office of the Chairman and Corporate Operating Committee since 2000.

STEPHEN I. SADOVE - From 1994 to 1996, President, Worldwide Clairol, a division of the Company. Mr. Sadove has been President, Worldwide Beauty Care, a division of the Company, since 1996 and Senior Vice President, Corporate Staff of the Company since 1998. Mr. Sadove has been a member of the Office of the Chairman and Corporate Operating Committee since 2000.

FREDERICK S. SCHIFF - From 1990 to 1997, Controller and Vice President, Corporate Staff of the Company, from 1997 to 2000 Controller and Vice President, Financial Operations, Corporate Staff of the Company. Mr. Schiff has been Controller and Senior Vice President, Financial Operations, Corporate Staff of the Company since March 2000. Mr. Schiff has been a member of the Corporate Operating Committee since 2000.

JOHN L. SKULE - From 1993 to 1997, Vice President, Public Affairs, Corporate Staff of the Company. Mr. Skule has been Senior Vice President, Corporate and Environmental Affairs, Corporate Staff of the Company since 1998. Mr. Skule has been a member of the Corporate Operating Committee since 2000.

CHARLES G. THARP, Ph.D. Dr. Tharp has been Senior Vice President, Human Resources, Corporate Staff of the Company since 1993. Mr. Tharp has been a member of the Corporate Operating Committee since 2000.

In addition to the positions and offices heretofore listed, all of the foregoing executive corporate officers and other executive officers of the Company are directors and/or officers of one or more affiliates of the Company, with the exception of Mr. Skule and Dr. Tharp.

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PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND

RELATED STOCKHOLDER MATTERS.

MARKET PRICES

Bristol-Myers Squibb common and preferred stocks are traded on the New York Stock Exchange and the Pacific Exchange, Inc. (symbol: BMY). A quarterly summary of the high and low market prices is presented below:

Preferred:

The Company's preferred stock traded at a high of $962 and a low of $857 during the second quarter of 2000 and at a price of $1,000 in the first quarter of 1999. During the first, third and fourth quarters of 2000, and the second, third and fourth quarters of 1999, there were no trades of the Company's preferred stock.

HOLDERS OF COMMON STOCK

The approximate number of record holders of common stock at December 31, 2000 was 114,096.

The number of record holders is based upon the actual number of holders registered on the books of Bristol-Myers Squibb at such date and does not include holders of shares in "street names" or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depository trust companies.

VOTING SECURITIES AND PRINCIPAL HOLDERS

At the close of business on March 5, 2001, there were 1,949,674,068 shares of $0.10 par value Common Stock and 9,702 shares of $2.00 Convertible Preferred Stock outstanding and entitled to vote.

The following table sets forth, as of February 1, 2001, beneficial ownership of shares of Common Stock of the company by each director, each of the named executive officers and all directors and officers as a group. None of these persons beneficially owns greater than 1% of the outstanding Common Shares nor any Preferred Shares. In addition, the table sets forth, as of the indicated dates, the beneficial ownership of shares of Common Stock of the company by each person known to be a beneficial holder of more than 5% of the outstanding class of Common Stock.

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Unless otherwise noted, such shares are owned directly or indirectly with sole voting and investment power.

1. includes direct and indirect ownership of shares, stock options that are currently exercisable, stock options that will become exercisable in 60 days and deferred common share units.
2. includes stock options that are currently exercisable and stock options that will be exercisable within 60 days.
3. amounts credited to directors' accounts in the 1987 Deferred Compensation Plan for Non-Employee Directors as deferred common share units which are valued according to the market value and stockholder return on equivalent shares of Common Stock.
4. includes 72 shares held by a family living trust over which neither Dr. Coffman nor his wife exercise voting or investment power.
5. includes 5,742 deferred common share units credited to Mr. Gerstner's account in the Squibb Corporation Deferred Plan for Fees of Outside Directors which are valued according to the market value and stockholder return on equivalent shares of Common Stock.
6. includes 5,000 shares held by Mr. Heimbold's wife over which he exercises shared voting and investment power and also includes 78,438 shares owned by a family charitable foundation over which Mr. Heimbold exercises shared voting and investment power. Mr. Heimbold disclaims beneficial ownership of the shares owned by the family charitable foundation. __________________________________________________________________________________________
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7. includes 550 shares held by one of Mr. Mee's children over which he exercises shared voting and investment power.
8. includes 452 shares owned jointly by Dr. Sullivan and his wife over which he exercises shared voting and investment power.
9. Includes 24,428 shares and 300 stock options held by other executive officers' immediate family members over which the executive officers share voting and investment power.
10. The source of this information is the Schedule 13G dated February 12, 2001 filed by FMR Corp. and certain other persons with the Securities and Exchange Commission reporting beneficial ownership as of December 31, 2000. Assuming that such persons continued to beneficially own the same number of shares at February 1, 2001, such beneficial ownership would represent approximately 6.2% of the outstanding class of Common Stock. The Schedule 13G reported that Edward C. Johnson, 3rd, Abigail P. Johnson, and certain other family members may be deemed to form a controlling group with respect to FMR Corp. and, therefore, Mr. Johnson and Ms. Johnson each also had beneficial ownership of 120,731,785 shares (which shares are the same shares as those beneficially owned by FMR Corp.) The Schedule 13G stated that Fidelity Management & Research Company, a wholly-owned subsidiary of FMR Corp. and a registered investment advisor, beneficially owned 110,721,446 shares at December 31, 2000 (representing approximately 5.7% of the outstanding class as of February 1, 2001; these shares are included in the shares reported as beneficially owned by FMR Corp.) The address of FMR Corp. and the named affiliates is 82 Devonshire Street, Boston, MA 02109

DIVIDENDS

Dividend payments per share in 2000 and 1999 were:

In December 2000, the Board of Directors of the Company declared a quarterly dividend of $.275 per share on the common stock of the Company, payable on February 1, 2001 to shareholders of record as of January 5, 2001. The 2001 indicated annual payment of $1.10 per share represents the twenty-ninth consecutive year that the Company has raised the dividend on its common stock.

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Item 6. SELECTED FINANCIAL DATA.

FIVE-YEAR FINANCIAL SUMMARY

OPERATING RESULTS

(in millions, except per share amounts)

SELECTED FINANCIAL DATA. (Con't.)

FIVE-YEAR FINANCIAL SUMMARY

FINANCIAL POSITION AT DECEMBER 31**

(in millions, except per share amounts)

Reference is made to Note 2 Discontinued Operations, Note 3 Acquisitions and Divestitures, Note 4 Restructuring and Note 17 Litigation, appearing in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K Annual Report.

** Financial position data relates to the Company's assets and liabilities, including discontinued operations.

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Summary

In September 2000, the Company announced the planned divestitures of the Zimmer and Clairol businesses. Accordingly, their results have been reported as discontinued operations and excluded from consolidated sales and expenses for all years. In February 2001, the Company announced its intention to separate the Zimmer business in a tax-free spin-off to shareholders. This transaction is expected to be completed by the end of the third quarter of 2001.

In 2000, Bristol-Myers Squibb reported $18.2 billion in annual global sales, an increase of 8% (11% excluding foreign exchange) over 1999. Domestic sales, representing 67% of worldwide sales, increased 14% to $12.1 billion, while international sales decreased 2% (a 5% increase excluding foreign exchange) to $6.1 billion. Sales growth resulted from an 8% increase due to volume, a 3% increase from changes in selling prices and a 3% decrease due to exchange rate fluctuations. Total Company sales including discontinued operations increased 5% (8% excluding foreign exchange) to $21.3 billion.

The Company's most important product lines made significant contributions to the Company's sales growth, many of which experienced double-digit growth on a worldwide basis. Three products, PRAVACHOL*, TAXOL* (paclitaxel) and GLUCOPHAGE, each exceeded $1.5 billion in annual sales, while five additional products exceeded $500 million in annual sales. Bristol-Myers Squibb had 54 product lines with more than $50 million in annual sales, including 31 with more than $100 million in annual sales.

Total Company earnings (continuing and discontinued operations) before income taxes increased 12% to $6.5 billion from $5.8 billion in 1999. Net earnings increased 13% to $4.7 billion; basic and diluted earnings per share increased 14% to $2.40 and 15% to $2.36, respectively. Earnings from continuing operations before income taxes, excluding restructuring charges and gain on sales of businesses, increased 13% to $5.8 billion in 2000. Net earnings, on this basis, increased 14% to $4.3 billion; basic and diluted earnings per share increased 15% to $2.19 and 16% to $2.16, respectively. Over the past five years, net earnings and diluted earnings per share from continuing operations, excluding gains from sales of businesses and restructuring and special charges, have increased at a compound annual growth rate of 14%. This growth rate enabled the Company to achieve its goal of doubling 1993 earnings and earnings per share by the end of 2000.

In 2000, consistent with the Company's mission to extend and enhance human life and to develop the highest quality products, the Company invested more than $1.9 billion in research and development, a 10% increase over the prior year. Research and development expenditure dedicated to pharmaceutical products increased 14% over 1999 with a compound annualized rate of 14% over the past five years. This significant investment has led to the discovery of innovative new products and the development of new indications for existing products leading, in 2000, to eight regulatory approvals and the filing of three dossiers in the US Notable approvals included GLUCOVANCE, a new oral combination drug, and GLUCOPHAGE XR Extended Release Tablets, a once-daily version of GLUCOPHAGE, both for diabetes; VANIQA*, a topical treatment for unwanted facial hair in women; and VIDEX* EC, a once-a-day, easier-to-digest, enteric-coated form of VIDEX* for HIV/AIDS.

Also in 2000, the Company announced a number of research alliances, collaborations and commercialization agreements with other companies, including a global agreement (excluding Japan) with Novartis AG to codevelop and copromote tegaserod, Novartis's new investigational drug treatment for irritable bowel syndrome; and a drug discovery alliance in the field of genomics with 3-Dimensional Pharmaceuticals, Inc., under which the Company will receive worldwide rights to compounds discovered or developed through the collaboration. This agreement is one of more than a dozen major genomics agreements the Company has entered into over the past three years.

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Bristol-Myers Squibb's financial position remains strong. At December 31, 2000, the Company held almost $3.4 billion in cash, time deposits and marketable securities. Cash provided by operating activities reached $4.7 billion, the highest in the past 10 years. Returns to shareholders included dividend distributions of $1.9 billion and stock repurchases of $2.3 billion. Dividends per common share were $.98 in 2000, increasing from $.86 per share paid in 1999. In December 2000, the Company announced a dividend increase, the 29th consecutive year that dividends have increased. The 2001 indicated annual payment is $1.10 per common share, a 12% increase over 2000. As further evidence of its strong financial position, Bristol-Myers Squibb is one of only seven US industrial companies to receive a triple-A credit rating from both Moody's and Standard & Poor's.

Net Sales

Sales increased 8% in 2000 to $18.2 billion, compared with increases of 12% and 10% in 1999 and 1998, respectively. The consolidated sales growth in 2000 resulted from an 8% increase due to volume, a 3% increase due to changes in selling prices and a 3% decrease due to foreign exchange rate fluctuations. In 1999, the 12% increase in sales reflected an 11% increase due to volume, a 2% increase due to changes in selling prices and a 1% decrease due to foreign exchange rate fluctuations. In 1998, the 10% increase in sales reflected an 11% increase due to volume, a 2% increase due to changes in selling prices and a 3% decrease due to foreign exchange rate fluctuations. Domestic sales increased 14% in 2000 and 19% in 1999, while international sales decreased 2% in 2000 (a 5% increase excluding foreign exchange) and increased 2% in 1999 (5% excluding foreign exchange). In general, the business of the Company is not seasonal.

In 2000, worldwide pharmaceutical sales increased 11% with US pharmaceutical sales up 18% over the prior year. Key pharmaceutical product sales include:

Sales of PRAVACHOL*, a cholesterol-lowering agent and the Company's largest selling product, increased 7% to $1,817 million primarily as a result of an increase in retail prescriptions. Domestic sales increased 9% to $1,127 million, while international sales increased 3% (14% excluding foreign exchange) to $690 million.

GLUCOPHAGE sales increased 32% to $1,732 million. GLUCOPHAGE, the leading branded oral medication for treatment of non-insulin dependent (type 2) diabetes, had a market share of 33.4% in 2000, up from 31.3% in the prior year. The marketing exclusivity for GLUCOPHAGE expired in September 2000; however, no generic competition existed at the end of the year. During the year, the Company received FDA approval for

GLUCOVANCE, an important advance in diabetes treatment, and for GLUCOPHAGE XR Extended Release tablets, a once-daily version of GLUCOPHAGE. Sales of GLUCOVANCE and GLUCOPHAGE XR since their launches were $110 million and $50 million, respectively.

Sales of TAXOL*, the Company's leading anticancer agent, increased 7% to $1,592 million as the product continued to benefit from increased use in ovarian, breast and non-small cell lung cancer following standard chemotherapy. Generic paclitaxel became available in the US during the third quarter of 2000.

Sales of PLAVIX, an anti-platelet medication, increased 65% to $903 million. Results of the landmark CURE trial (Clopidogrel in Unstable Angina to Prevent Recurrent Ischemic Events), jointly sponsored by the company and Sanofi-Synthelabo, were announced in March 2001. In this international trial of more than 12,500 patients with acute coronary syndromes (unstable angina or non-Q wave myocardial infarction), PLAVIX was significantly superior to standard therapies, including aspirin, in reducing a cluster of clinical events: heart attack, stroke and cardiovascular death. Sales of AVAPRO, an angiotensin II receptor blocker for the treatment of hypertension, increased 49% to $381 million. AVAPRO and PLAVIX are cardiovascular products that were launched from the Bristol-Myers Squibb and Sanofi-Synthelabo joint venture.

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Sales of BUSPAR*, the Company's novel antianxiety agent, increased 17% to $709 million. The US anxiolytic use patent expired in June 2000. The Food and Drug Administration (FDA) granted the company an additional six months exclusivity based on its performance of pediatric studies. In November 2000, the Company received a patent covering the anxiolytic use of a BUSPAR* metabolite, a compound produced in the body by the oral administration of BUSPAR* and buspirone itself. The patent was subsequently de-listed during the course of litigation brought by generic manufacturers. On March 28, 2001, three generic manufacturers received final approval from the FDA for their respective Abbreviated New Drug Applications (ANDAs) for buspirone. Each of these three ANDAs covers a separate dosage strength of buspirone. FDA approvals of additional ANDAs for buspirone (of any dosage strength) can occur at any time beginning in September 2001. The litigation is on-going.

Sales of SERZONE*, a novel antidepressant, increased 8% to $360 million.

Sales of PARAPLATIN*, which is used in combination therapy for the treatment of ovarian cancer, increased 15% to $690 million.

Sales of MEGACE* O/S, indicated for the treatment of anorexia and cachexia in patients with AIDS, increased 58% to $180 million. Sales of MAXIPIME*, a fourth-generation injectable cephalosporin antibiotic, increased 10% to $146 million.

Sales of TEQUIN*, a quinolone antibiotic launched in December 1999, were $131 million. In November 2000, TEQUIN* became the first quinolone antibiotic to be prescribed for more than one million patients in the US after just 10 months on the market.

Sales of DOVONEX*, an adult dermatological treatment, increased 20% from the prior year to $121 million. Sales of IFEX*, used in combination chemotherapy treatment, increased 23% to $108 million.

Sales of captopril, an ACE inhibitor sold primarily under the trademark CAPOTEN*, declined 26% to $356 million due to generic competition.

Sales from the Oncology Therapeutics Network, a specialty distributor of anticancer medicines and related products, were $1,080 million for the year, an increase of 21% over 1999.

Nonpharmaceutical sales included sales of BUFFERIN*, which increased 10% (5% excluding foreign exchange) to $161 million due to increased sales in Japan, while sales of EFFERALGAN*, an effervescent analgesic sold primarily in France, increased 4% (20% excluding foreign exchange) to $172 million.

Total infant formula sales decreased 2% to $1,212 million. Sales of ENFAMIL*, the Company's largest selling infant formula, remained at prior year levels of $732 million worldwide. Sales of ostomy products decreased 5% (a 1% increase excluding foreign exchange) to $428 million while sales of wound care products decreased 3% (a 3% increase excluding foreign exchange) to $232 million.

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Earnings

In 2000, earnings from continuing operations before income taxes, excluding the nonrecurring items described below, increased 13% to $5,826 million from $5,158 million in 1999. Net earnings, on this basis, increased 14% to $4,309 million compared with $3,789 million in 1999. Basic earnings per share increased 15% to $2.19 from $1.91 in the prior year and diluted earnings per share increased 16% to $2.16 from $1.87. Net earnings margins increased to 23.7% in 2000 from 22.4% in 1999. In 1999, net earnings were $3,789 million, an 18% increase over 1998, excluding the nonrecurring items described below. On this basis, basic earnings per share and diluted earnings per share both increased 18% over 1998 and net earnings margins increased to 22.4% in 1999 from 21.4% in 1998.

The Company recorded certain nonrecurring items ("nonrecurring items") in 2000 to earnings of continuing operations, including the gain on sales of businesses (three pharmaceutical products - Estrace Cream, Ovcon 35 and Ovcon 50 as well as its Sea Breeze brand in Japan) of $160 million before taxes, $116 million after taxes or $.06 per diluted share; as well as restructuring charges of $508 million before taxes, $329 million after taxes or $.17 per diluted share, in connection with workforce reductions and asset write-downs related to the consolidation and closure of plants and facilities and other expenses. In 1998, the Company recorded certain nonrecurring items to earnings of continuing operations, including the gain on sales of businesses (Ban, A/S GEA and Hexachimie) of $201 million before taxes, $125 million after taxes or $.06 per diluted share; as well as restructuring charges of $157 million before taxes, $98 million after taxes or $.05 per diluted share in connection with asset write-downs and employee-related costs related to the consolidation and closure of plants and facilities. Also, in 1998, the Company recorded a special charge of $800 million before taxes, $495 million after taxes, or $.24 per diluted share, to augment the reserve for breast implant liability and for prescription drug pricing litigation, offset by expected insurance recoveries.

The effective income tax rate on earnings from continuing operations before income taxes was 25.2% in 2000, compared with 26.5% in 1999, and 24.4% in 1998. The effective income tax rate on earnings from continuing operations before income taxes, excluding the nonrecurring items, was 26.0% in 2000, compared with 26.5% in 1999, and 26.8% in 1998. The effective income tax rate has decreased since 1998 due to increased income in lower tax jurisdictions.

Total Company earnings (continuing and discontinued operations) before taxes increased 12% to $6,486 million from $5,767 million in 1999. Net earnings increased 13% to $4,711 million compared with $4,167 million in 1999. Basic earnings per share increased 14% to $2.40 from $2.10 in the prior year and diluted earnings per share increased 15% to $2.36 from $2.06. In 1999, net earnings were $4,167 million, an increase of 15% from $3,636 million in 1998, excluding the special charge. On this basis, basic earnings per share were $2.10 and diluted earnings per share were $2.06, both increasing 15% over 1998.

Expenses

Total costs and expenses, excluding the nonrecurring items, as a percentage of sales, improved over the past three years to 68.0% in 2000 compared with 69.4% in 1999, and 70.8% in 1998.

Cost of products sold, as a percentage of sales, improved to 26.1% in 2000 from 26.9% in 1999, principally due to manufacturing efficiencies. In 1999, cost of products sold as a percentage of sales increased to 26.9%, compared with 25.9% in 1998, principally due to sales growth of lower margin products from the Oncology Therapeutics Network.

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Advertising and promotion expenses increased 8% over the prior year to $1,672 million in 2000, primarily as a result of a direct-to-consumer campaign for PRAVACHOL* and launch spending for GLUCOVANCE and TEQUIN*. In 1999, advertising and promotion expenses increased 2% from 1998 to $1,549 million. As a percentage of sales, advertising and promotion expenses remained at prior year levels of 9.2% and decreased from 10.1% in 1998, reflecting an improvement in the effectiveness of the advertising and promotion spending.

Marketing, selling and administrative expenses, as a percentage of sales, decreased to 21.2% in 2000 from 22.4% in 1999 and 24.5% in 1998. This decreasing trend is a result of slower rates of increase in marketing, sales force and general administrative expenses compared with revenue increases in the same period.

The Company's investment in research and development totaled $1,939 million in 2000, an increase of 10% over 1999, and to 10.6% in 2000, as a percentage of sales, compared with 10.4% in 1999 and 10.0% in 1998. This spending level reflects the Company's commitment to research over a broad range of therapeutic areas and to clinical development of new products. Over the past five years, research and development expenses have increased at a compound annual growth rate of 11%. In 2000, research and development spending dedicated to pharmaceutical products increased 14%, and was 13.0% of pharmaceutical sales compared with 12.6% and 12.4% in 1999 and 1998, respectively.

As described in the notes to the financial statements, in the first quarter of 2000, the Company completed the sale of three pharmaceutical products - Estrace Cream, Ovcon 35 and Ovcon 50 as well as its Sea Breeze brand in Japan. In 1999, the Company acquired CAL-C-TOSE*, a leading nutritional milk modifier product in Mexico. Also, in 1999, the Company completed the sale of Laboratori Guieu, SpA, an Italian-based gynecological, pediatric and dermatological products business. In 1998, the Company acquired Dong-A Biotech Co., Ltd., a marketer and distributor of pharmaceutical products in South Korea. Also, in 1998, the Company divested its Ban brand of anti-perspirants and deodorants; A/S GEA, a Denmark-based generic drug business; and Hexachimie, a specialty chemical manufacturer based in France.

Discontinued Operations

Clairol sales decreased 6% to $1,894 million. Domestic sales decreased 4% while international sales decreased 9% (8% excluding foreign exchange). In 1999, Clairol sales increased 4% to $2,020 million from $1,940 million in 1998.

Zimmer sales increased 9% to $1,053 million, led by an increase in sales of knee joint replacements of 10% to $416 million, of hip replacements of 14% to $329 million and of fracture management products of 15% to $145 million. In 1999, Zimmer sales increased 5% to $963 million from $919 million in 1998.

As described in the notes to the financial statements, in the third quarter of 2000, the Company completed the sale of Matrix Essentials, Inc. (Matrix), an affiliate of Clairol. Matrix sales for the first six months of 2000 were $168 million and were $361 million for the full year in 1999.

As described in Note 2 to the financial statements, in 2000 and 1998 the Company recorded restructuring charges to discontinued operations of $34 million and $44 million before taxes, respectively, primarily in connection with workforce reductions. In 2000, the Company recorded a pretax gain of $402 million ($240 million after taxes) on the sale of Matrix. The gain is included in the gain on disposal of discontinued operations.

As a result of the restructuring charges, net earnings from discontinued operations were $375 million in 2000 and $391 million in 1998. Net earnings from discontinued operations, excluding the restructuring charges, increased 5% to $397 million in 2000 and decreased 10% to $378 million in 1999.

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Geographic Areas

Bristol-Myers Squibb products are available in virtually every country in the world; the Company's largest markets are the US, France, Japan, Germany and Canada.

Sales in the United States increased 14% in 2000. Products with strong growth in the region included GLUCOPHAGE, PLAVIX, BUSPAR*, PARAPLATIN* and AVAPRO. In 1999, sales in the United States increased 19%, primarily due to growth of GLUCOPHAGE, TAXOL*, ENFAMIL*, BUSPAR*, PLAVIX, PARAPLATIN* and AVAPRO.

Sales in Europe, Mid-East and Africa decreased 9% in 2000. Sales increased 3%, excluding foreign exchange, as a result of growth in France due to increased sales of PRAVACHOL* and EFFERALGAN*, partially offset by decreased sales of CAPOTEN* due to generic competition; in Italy due to increased sales of TAXOL* and AVAPRO; and in Spain due to increased sales of PRAVACHOL*, AVAPRO and PLAVIX. Excluding foreign exchange, sales in Germany were 2% below prior year levels due to increased emphasis on generics and governmental spending controls. In 1999, sales in Europe, Mideast and Africa increased 2% (4% excluding foreign exchange), due to sales growth of products including PRAVACHOL*, TAXOL*, PLAVIX and AVAPRO. These increases were partially offset by decreases in sales of ostomy supplies and of CAPOTEN* due to generic competition.

Sales in Other Western Hemisphere countries increased 3% (6% excluding foreign exchange) in 2000 primarily as a result of growth in Canada due to increased sales of PLAVIX, AVAPRO and ENFAMIL*, and in Mexico due to growth of ENFAMIL* and CAL-C-TOSE*. In 1999, sales in Other Western Hemisphere countries decreased 9% (a 3% increase excluding foreign exchange) primarily resulting from decreases in sales of CAPOTEN* and PRAVACHOL*, partially offset by growth in ENFAMIL*, AVAPRO and PLAVIX.

Sales in the Pacific region increased 12% in 2000 (11% excluding foreign exchange). Products with strong growth included BUFFERIN*, TAXOL* and PARAPLATIN* in Japan and nutritional products in the Philippines and Thailand. In 1999, Pacific region sales increased 18% (10% excluding foreign exchange) as a result of increases in BUFFERIN*, TAXOL* and PARAPLATIN*. The favorable effect from foreign exchange was experienced primarily in Japan.

Financial Instruments

Cash and cash equivalents, time deposits and marketable securities totaled almost $3.4 billion at December 31, 2000 compared with $3.0 billion and $2.5 billion at December 31, 1999 and 1998, respectively. Working capital continued to improve with $4.2 billion at December 31, 2000, compared with $3.7 billion and $3.0 billion at December 31, 1999 and 1998, respectively. Cash and cash equivalents, time deposits and marketable securities, in addition to the conversion of other working capital items are expected to fund near-term operations of the Company.

The Company is exposed to market risk due to changes in currency exchange rates. To reduce this risk, the Company enters into certain derivative financial instruments when available on a cost-effective basis to hedge its underlying economic exposure. These instruments also are managed on a consolidated basis to efficiently net exposures and thus take advantage of any natural offsets. Derivative financial instruments are not used for trading purposes. Gains and losses on hedging transactions are offset by gains and losses on the underlying exposures being hedged.

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Foreign exchange option contracts and, to a lesser extent, forward contracts are used to hedge anticipated transactions. The Company's primary foreign currency exposures in relation to the US dollar are the euro, Mexican peso, Canadian dollar, Brazilian real and Japanese yen.

The table below summarizes the Company's outstanding foreign exchange option contracts as of December 31, 2000. The fair value of option contracts, which changes over time, is estimated by using the Black-Scholes model and is based on year-end currency rates. The fair value of option contracts should be viewed in relation to the fair value of the underlying hedged transactions and the overall reduction in exposure to adverse fluctuations in foreign currency exchange rates.

At December 31, 1999, the Company held right-to-sell option contracts with an aggregate notional amount, carrying value and fair value of $1,621 million, $28 million and $69 million, respectively. These contracts related primarily to option contracts with the right to sell euros, Mexican pesos and Canadian dollars. Other contracts at December 31, 1999 included right-to-buy option contracts, primarily to buy Japanese yen for US dollars. These contracts had an aggregate notional amount and fair value of $141 million and $20 million, respectively, and no carrying value.

The Company maintains cash and cash equivalents, time deposits and marketable securities with various financial institutions. These financial institutions are located primarily in the US and Europe. Company policy is designed to limit exposure to any one financial institution.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement requires that companies recognize all derivatives as either assets or liabilities on the balance sheet and measure these instruments at fair value. In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the effective date of FASB Statement No. 133. This statement deferred the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which made minor amendments to SFAS No. 133. The Company adopted SFAS No. 133, as amended, on January 1, 2001. The adoption of this accounting requirement will not have a material effect on either the Company's consolidated financial statements or hedging programs.

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Euro Conversion

On January 1, 1999, certain members of the European Union established fixed conversion rates between their existing currencies and the European Union's common currency, known as the euro. It is planned that by July 1, 2002 the participating countries will withdraw all currencies and use the euro exclusively.

The Company has committed resources to conduct assessments and to take corrective actions to ensure it is prepared for the introduction of the euro. The Company is actively addressing the many areas involved with the introduction of the euro, including information management, finance, legal and tax. This review includes the conversion of information technology, business and financial systems; evaluation of currency risk; and the effect on the Company's financial instruments, as well as the impact on the pricing and distribution of Company products.

The Company believes the effect of introduction of the euro, as well as any related cost of conversion, will not have a material impact on the results of operations, financial condition and cash flows.

Financial Position

Cash and cash equivalents, time deposits and marketable securities at December 31, 2000 were denominated primarily in US dollar instruments with near-term maturities. The average interest yield on cash and cash equivalents was 5.9% at December 31, 2000, while interest yields on time deposits and marketable securities averaged 5.7% at December 31, 2000.

Short-term borrowings and long-term debt at December 31, 2000 are denominated primarily in US dollars but also include Japanese yen long-term debt of $272 million. During the year the Company reduced short-term borrowings by $247 million primarily as a result of the paydown of the international commercial paper program.

Internally generated cash provided by operations was $4.7 billion in 2000, $4.2 billion in 1999 and $3.8 billion in 1998. Cash provided by operations continued to be the Company's primary source of funds to finance operating needs and expenditures for new plants and equipment. As part of the Company's ongoing commitment to improve plant efficiency and maintain superior research facilities, the Company has invested $2.1 billion in capital expansion over the past three years. Cash flow from operations also included product liability payments, net of insurance recoverable receipts of $73 million in 2000, $667 million in 1999 and $519 million in 1998.

Cash provided by operations also was used over the past three years to pay dividends of $5.2 billion, to finance $5.3 billion of the Company's share repurchase program and to fund business acquisitions, including the purchase of patents and trademarks, at a cost of $555 million. The Company's share repurchase program authorizes the Company to purchase common stock from time to time in the open market or through private transactions as market conditions permit.

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During 2000, the Company purchased 40 million shares of common stock at a cost of $2.3 billion, bringing the total shares acquired since the program's inception to 340 million. In September 2000, the Company announced a $2 billion increase in the stock repurchase program authorization. During the past three years, the Company has repurchased 93 million shares at a cost of $5.3 billion.

Employment levels for continuing operations of 44,004 at December 2000 decreased from prior year levels of 45,955. Sales per employee improved to $414 thousand in 2000 from $367 thousand in 1999 and $324 thousand in 1998.

Return on Stockholders' Equity, excluding nonrecurring items, improved over the last three years and was 48.3% in 2000, 46.7% in 1999 and 43.5% in 1998.

Forward Looking Information

This Form 10-K Annual Report, and other written and oral statements that the Company makes from time to time, contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, statements relating to goals, plans and projections with respect to the Company's financial position, results of operations, market position, product development and business strategy. These statements may be identified by the fact that they use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. These factors include, among other things, market factors, competitive product development, governmental regulations and legislation, patent positions and litigation. Further details and a discussion of these and other risks and uncertainties, are included in Exhibit 99 to this Form 10-K Annual Report. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENT OF EARNINGS

(in millions except per share amounts)

The accompanying notes are an integral part of these financial statements.

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BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME AND RETAINED EARNINGS

(in millions except per share amounts)

The accompanying notes are an integral part of these financial statements.

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BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED BALANCE SHEET

ASSETS

(dollars in millions)

The accompanying notes are an integral part of these financial statements.

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BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED BALANCE SHEET

LIABILITIES AND STOCKHOLDERS' EQUITY

(dollars in millions)

The accompanying notes are an integral part of these financial statements.

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BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(dollars in millions)

The accompanying notes are an integral part of these financial statements.

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BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Note 1 ACCOUNTING POLICIES

Basis of Consolidation - The consolidated financial statements include the accounts of Bristol-Myers Squibb Company and all of its subsidiaries.

Cash and Cash Equivalents - Cash and cash equivalents primarily include securities with a maturity of three months or less at the time of purchase, recorded at cost, which approximates market value.

Time Deposits and Marketable Securities - Time deposits and marketable securities are available for sale and are recorded at fair value, which approximates cost.

Inventory Valuation - Inventories are generally stated at average cost, not in excess of market.

Capital Assets and Depreciation - Expenditures for additions, renewals and betterments are capitalized at cost. Depreciation is generally computed by the straight-line method based on the estimated useful lives of the related assets. The estimated useful lives of the major classes of depreciable assets are 50 years for buildings and 3 to 40 years for machinery, equipment and fixtures.

Excess of Cost over Net Tangible Assets - The excess of cost over net tangible assets received in business acquisitions is being amortized on a straight-line basis over periods not exceeding 40 years. The excess of cost over net tangible assets is periodically reviewed for impairment based on an assessment of future operations (including cash flows) to ensure that the excess of cost over net tangible assets is appropriately valued.

Product Liability - Accruals for product liability are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on existing information. These accruals are adjusted periodically as assessment efforts progress or as additional information becomes available. Receivables for related insurance or other third-party recoveries for product liabilities are recorded, on an undiscounted basis, when it is probable that a recovery will be realized. Insurance recoverable recorded on the balance sheet has, in general, payment terms of two years or less.

Revenue Recognition - Revenue from product sales is recognized upon shipment to customers.

Earnings Per Share - Basic earnings per common share are computed using the weighted average number of shares outstanding during the year. Diluted earnings per common share are computed using the weighted average number of shares outstanding during the year, plus the incremental shares outstanding assuming the exercise of dilutive stock options.

Reclassifications - Certain reclassifications have been made to prior year amounts to conform with current year presentation.

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BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Note 2 DISCONTINUED OPERATIONS

On September 28, 2000, the Company announced the planned divestitures of its Clairol and Zimmer businesses. The Company expects these businesses to be divested in 2001. Accordingly, the operations of Clairol (which includes its Matrix Essentials, Inc. "Matrix" affiliate) and Zimmer have been reflected as discontinued operations in the accompanying consolidated statement of earnings.

In 2000, the Company completed the sale of Matrix to Cosmair, Inc., a wholly owned US subsidiary of L'Oreal S.A., resulting in a pretax gain of $402 million ($240 million after taxes). This gain is included in gain on disposal of discontinued operations.

The net sales and earnings of discontinued operations are as follows:

Earnings before income taxes for the years ended December 31, 2000 and 1998 include restructuring charges of $34 million and $44 million, respectively.

The consolidated balance sheet and consolidated statement of cash flows include the Clairol and Zimmer businesses. The net assets of discontinued operations expected to be disposed at December 31, 2000, 1999 and 1998 were as follows:

The Company uses a centralized approach to cash management and financing of its operations and, accordingly, the Company did not allocate debt to these businesses.

Cash flows from operating and investing activities of discontinued operations for the years ended December 31, 2000, 1999 and 1998 were $988 million (including $438 million of net proceeds from the sale of Matrix), $261 million and $289 million, respectively.

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BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Note 3 ACQUISITIONS AND DIVESTITURES

In 2000, the company completed the sale of three pharmaceutical products - Estrace Cream, Ovcon 35 and Ovcon 50 as well as its Sea Breeze brand in Japan, resulting in a pretax gain of $160 million, recorded in continuing operations.

In June 1999, the company acquired CAL-C-TOSE*, a nutritional milk modifier. In September 1999, the company entered into a development and commercialization agreement for aripiprazole, a novel drug under study in phase III trials as a treatment for schizophrenia, with Otsuka Pharmaceutical Co., Ltd. In December 1999, the company completed the sale of Laboratori Guieu, a gynecological, pediatric and dermatological products business headquartered in Milan, Italy. The gain on the sale was not material.

In 1998, the company acquired Dong-A Biotech Co., Ltd., a marketer and distributor of pharmaceutical products in South Korea. In 1998, the company divested its Ban brand of antiperspirants and deodorants, A/S GEA, a Denmark-based generic drug business, and Hexachimie, a specialty chemical manufacturer based in France, resulting in a combined pretax gain of $201 million.

Note 4 RESTRUCTURING

During 2000, the Company recorded pretax charges of $508 million for continuing operations. These charges were primarily for restructuring activities related to workforce reductions, downsizing and streamlining of operations in certain international markets and the ConvaTec business, and the reorganization of the Company's Global Business Services. The $508 million of restructuring charges consisted of $298 million of employee termination benefits for approximately 5,200 employees, $136 million of asset write-downs related to the closure of manufacturing and research facilities and $74 million of other expenses. The $398 million liability originally recorded in accrued expenses was reduced to $247 million at December 31, 2000. The Company expects to substantially complete these restructuring activities by mid-2001.

In 1998, the Company recorded pretax charges of $157 million for continuing operations. These restructuring charges consisted primarily of asset write-downs and employee-related costs related to the consolidation and closure of plants and facilities.
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BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Note 5 EARNINGS PER SHARE

The computations for basic earnings per common share and diluted earnings per common share are as follows:

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BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Note 6 OTHER INCOME AND EXPENSES

Cash payments for interest were $112 million, $119 million and $157 million in 2000, 1999 and 1998, respectively.

Note 7 PROVISION FOR INCOME TAXES

The components of earnings from continuing operations before income taxes were:

The above amounts are categorized based on the location of the taxing authorities. In 2000, the Company continued to convert domestic Puerto Rico operations to non-U.S. operations.

The provision for income taxes attributable to continuing operations consisted of:

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BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

The Company's provision for income taxes in 2000, 1999 and 1998 was different from the amount computed by applying the statutory United States Federal income tax rate to earnings before income taxes, as a result of the following:

Prepaid taxes at December 31, 2000, 1999 and 1998 were $537 million, $567 million and $809 million, respectively. The deferred income tax liability, included in Other Liabilities, at December 31, 2000, 1999 and 1998 was $425 million, $445 million and $277 million, respectively.

The components of prepaid and deferred income taxes consisted of:

Income taxes paid during the year were $1,620 million, $805 million and $654 million in 2000, 1999 and 1998, respectively.

The Company has settled its United States Federal income tax returns with the Internal Revenue Service through 1991.

United States Federal income taxes have not been provided on substantially all of the unremitted earnings of non-U.S. subsidiaries, since it is management's practice and intent to reinvest such earnings in the operations of these subsidiaries. The total amount of the net unremitted earnings of non-U.S. Subsidiaries was approximately $6.0 billion at December 31, 2000.
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BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Note 8 INVENTORIES

Inventories of discontinued operations constituted approximately 18% of total Company inventory for the year ended December 31, 2000 and 23% of total Company inventory for the years ended December 31, 1999 and 1998.

Note 9 PROPERTY, PLANT AND EQUIPMENT

Depreciation expense for the years ended December 31, 2000, 1999 and 1998 was $408 million, $384 million and $359 million, respectively.

Property, plant and equipment of discontinued operations constituted approximately 8% of total Company property, plant and equipment for the years ended December 31, 2000, 1999 and 1998.

Note 10 SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Included in short-term borrowings were amounts due to banks, primarily foreign banks, of $152 million, $245 million and $272 million at December 31, 2000, 1999 and 1998, respectively, and current installments of long-term debt of $10 million at December 31, 2000 and 1999 and $43 million at December 31, 1998. Also included in short-term borrowings at December 31, 1999 and 1998, was $177 million and $167 million, respectively, of commercial paper outstanding. The average interest rate on short-term borrowings was 7.97% and on current installments of long-term debt was 6.38% at December 31, 2000.

During 2000, the Company renewed two credit facilities, aggregating $500 million, with a syndicate of lenders as support for its commercial paper program. The credit facilities consist of a $250 million, 364-day credit facility, which may be renewed annually with the consent of the lenders for an additional 364-day period and a $250 million, five-year credit facility, extendible at each anniversary date with the consent of the lenders. There were no borrowings outstanding under the credit facilities at December 31, 2000. In addition, the Company has unused short-term lines of credit with foreign banks of $337 million.

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BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

The components of long-term debt were:

Note 11 STOCKHOLDERS' EQUITY

Changes in capital shares and capital in excess of par value of stock were:

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41

BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Each share of the Company's preferred stock is convertible into 16.96 shares of common stock and is callable at the Company's option. The reductions in the number of issued shares of preferred stock in 2000, 1999 and 1998 were due to conversions into shares of common stock.

Dividends per common share were $.98 in 2000, $.86 in 1999 and $.78 in 1998.

Stock Compensation Plans

Under the Company's 1997 Stock Incentive Plan, officers, directors and key employees may be granted options to purchase the Company's common stock at no less than 100% of the market price on the date the option is granted. Options generally become exercisable in installments of 25% per year on each of the first through the fourth anniversaries of the grant date and have a maximum term of 10 years. Additionally, the plan provides for the granting of stock appreciation rights whereby the grantee may surrender exercisable options and receive common stock and/or cash measured by the excess of the market price of the common stock over the option exercise price. The plan also provides for the granting of performance-based stock options to certain key executives.

Under the terms of the 1997 Stock Incentive Plan, as amended, additional shares are authorized in the amount of 0.9% of the outstanding shares per year through 2002. The plan incorporates the Company's long-term performance awards.

In addition, the 1997 Stock Incentive Plan provides for the granting of up to 20,000,000 shares of common stock to key employees, subject to restrictions as to continuous employment except in the case of death or normal retirement. Restrictions generally expire over a five-year period from date of grant. Compensation expense is recognized over the restricted period. At December 31, 2000, a total of 1,821,194 restricted shares were outstanding under the plan.

Under the TeamShare Stock Option Plan, all full-time employees, excluding key executives, meeting certain years of service requirements are granted options to purchase the Company's common stock at the market price on the date the options are granted. The Company has authorized 62,000,000 shares for issuance under the plan. As of December 31, 2000, a total of 28,455,134 shares have been exercised under the plan.

The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its plans. Accordingly, no compensation expense has been recognized for its stock-based compensation plans other than for restricted stock and performance-based awards. Had compensation cost for the Company's other stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, the Company's net income and earnings per share would have been reduced by approximately $218 million, or $.11 per common share, basic and diluted, in 2000, $198 million, or $.10 per common share, basic and diluted, in 1999 and $136 million, or $.07 per common share, basic and diluted, in 1998. The fair value of the options granted during 2000, 1999 and 1998 was estimated as $17.17 per common share, $17.37 per common share and $11.80 per common share, respectively, on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

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42

BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Stock option transactions were:

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43

BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

The following table summarizes information concerning currently outstanding and exercisable options:

At December 31, 2000, 209,405,290 shares of common stock were reserved for issuance pursuant to stock plans, options and conversions of preferred stock. Options related to discontinued operations and included in the above amounts are not material.

Note 12 FINANCIAL INSTRUMENTS

Foreign exchange option contracts and, to a lesser extent, forward contracts, are used to hedge anticipated foreign currency transactions, primarily intercompany inventory purchases expected to occur within the next year.

The Company has exposures to net foreign currency denominated assets and liabilities, which approximated $1,781 million, $2,179 million and $2,310 million at December 31, 2000, 1999 and 1998, respectively, primarily in Europe, Japan and Mexico. The Company mitigates the effect of these exposures through third-party borrowings. The exposures to net foreign currency denominated assets and liabilities related to discontinued operations and included in the above amounts are not material.

The risk of loss associated with the types of foreign exchange option contracts entered into by the Company is limited to premium amounts paid for the option contracts. Premiums are deferred in Prepaid Expenses and amortized in the consolidated statement of earnings (in the Other caption) over the time frame of the underlying hedged transaction. Gains related to the option contracts, which qualify as hedges of foreign currency anticipated transactions, are recognized in earnings when the hedged transactions are recognized. Gains and losses on foreign exchange forward contracts are recognized in the basis of the underlying transaction being hedged.

The notional amounts of the Company's foreign exchange option contracts at December 31, 2000, 1999 and 1998 were $1,395 million, $1,762 million and $1,307 million, respectively. The notional amounts of foreign exchange contracts related to discontinued operations and included in the above amounts are not material.

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44

BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

The Company does not anticipate any material adverse effect on its financial position resulting from its involvement in these instruments, nor does it anticipate nonperformance by any of its counterparties.

At December 31, 2000, 1999 and 1998, the carrying value of all financial instruments, both short- and long-term, approximated their fair values.

Note 13 LEASES

Minimum rental commitments under all noncancelable operating leases, primarily real estate, in effect at December 31, 2000 were:

Minimum rental commitments and operating lease rental expense related to discontinued operations and included in the above amounts are not material. Operating lease rental expense (net of sublease rental income of $21 million in 2000, $24 million in 1999 and $27 million in 1998) was $85 million in 2000, $87 million in 1999 and $102 million in 1998.

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45

BRISTOL-MYERS SQUIBB COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions)

Note 14 SEGMENT INFORMATION

The Company operates in one significant business segment - medicines. Operations of the Nutritional and ConvaTec businesses are not material and share many of the same economic and operating characteristics as the medicines business. Most of the pharmaceutical products are distributed through wholesalers. Two wholesalers accounted for approximately 13% and 12% of net sales from continuing operations in 2000.

Sales of selected products and product categories are as follows:

GEOGRAPHIC AREAS