The long-running dispute between cigarette maker
Philip Morris International Inc
) and 19 U.S. states has come to an end. Other cigarette makers
also reached an agreement and these companies, including Philip
Morris, have agreed to pay $4 billion to the states under the
1998 anti smoking agreement.
The dispute was related to Non-Participating Manufacturer
(NPM) adjustment provisions of the Master Settlement Agreement
(MSA). Under this agreement, inked between 46 states and major
tobacco players including Philip Morris,
Reynolds American Inc.
), the tobacco makers had agreed to pay the states for their
tobacco-related health-care costs and also abide by the
restrictions on advertising, marketing and selling cigarettes in
The dispute arose over the amount of payment that these
tobacco companies had to pay to the state governments, since they
lost market share in these states to other companies who did not
enter into the agreement.
The 19 states that reached the agreement are Alabama, Arizona,
Arkansas, California, Georgia, Kansas, Louisiana, Michigan,
Nebraska, Nevada, New Hampshire, New Jersey, North Carolina,
Tennessee, Virginia, West Virginia, Wyoming, Puerto Rico and the
District of Columbia.
The states have so far received $85 billion. According to the
settlement, the 19 states will get their share of about $4
billion that was paid into a disputed payments account. In
return, the tobacco giants will receive credits against future
payments to the states.
Philip Morris will get 28% of credit to the companies that
were original participants in the settlement. It is estimated to
total approximately $450.0 million, but it may vary depending on
various factors. However, the company said that it will continue
negotiations with states that were not part of the new
Currently, we have a Neutral recommendation on the stock.
Philip Morris holds a Zacks #3 Rank (short term Hold rating).
Philip Morris reported adjusted third quarter 2012 earnings per
share of $1.45, surpassing the year-ago quarter's earnings by
5.8%, excluding currency. Earnings beat the Zacks Consensus
Estimate of $1.39.
LORILLARD CO (LO): Free Stock Analysis Report
PHILIP MORRIS (PM): Free Stock Analysis
REYNOLDS AMER (RAI): Free Stock Analysis
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