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Action Smoking and Health (ASH)
http://ash.org/august97/8-1-97-3.html
4SH
ACTION ON SMOKING AND HEALTH
A National Legal-Action Antismoking Organization
2013 H St., NW, Wash. DC 20006, (202) 659-4310
http://ash.org
CONGRESS CAVES TO TOBACCO INDUSTRY[8.1.3]
Shows Danger o of Proceeding with Global Settlement
Not only did Congress pass a cigarette tax increase that is too little too late, but they have given the
tobacco industry a 50 billion dollar windfall. Most significantly, the language giving the tobacco industry
the windfall was snuck into the budget agreement behind closed doors. Essentially, it 's 24 billion for
children's health and 50 billion for the tobacco industry. This is outrageous.
If Congress can't even pass a simple cigarette tax increase, how can they possibly be trusted to enact a
complex global tobacco settlement? The tobacco settlement is seriously flawed and needs major repair. If
Congress tries to move a bill forward like the one being prepared in the Senate Judiciary based on the
settlement, we can expect a bad bill to get worse. Sneak provisions in the dead of night are a tobacco
industry specialty.
Congress should let the Court's and agencies do their job. If not, Congress needs to follow
Koop-Kessler's advice and start with the public health not a tobacco agreement that already favors the
industry.
Following are excerpts from the New York Timesan Associate Press reports of this egregious deal:
In a potential windfall for cigarette producers, new taxes paid by smokers will save the tobacco industry
billions of dollars by reducing the amount of money companies would owe if the proposed tobacco
settlement plan became law.
Under a last-minute addition to the new budget deal, revenue generated by the added tobacco taxes will
be counted as credits toward payments by cigarette companies if the $368.5 billion plan reached in June
between tobacco producers and state attorneys general takes effect.
Several lawmakers expressed anger yesterday on seeing its exact language. In a final effort to derail it,
Senator Richard J. Durbin, Democrat of Illinois, introduced language to strike the provision, but fellow
lawmakers voted 78 to 22 to defeat the motion.
Under the budget agreement, Federal taxes on a pack of cigarettes, which now stand at 24 cents, would
rise 10 cents in the year 2000 and 5 cents more in 2002. That would produce $5.2 billion in new revenue
over five years and $16.7 billion over the next 10 years, which is currently scheduled to be used to pay
for health coverage for uninsured children.
Cigarette industry officials had initially fought an increase in cigarette taxes but then supported the tax
rise so long as the money was used as a credit against payments they would make under the settlement
plan.
I of 2
08/04/97 16:17:29
Action c1 Smoking and Health (ASH)
http://ash.org/august97/8-1-97-3.html
The Senate upheld the provision Thursday, 78 to 22, after Sen. Richard Durbin (D-III.) moved to strip it
from the bill. He said over 25 years the cigarette tax would raise $ 50 billion, which tobacco companies
would not have to spend on the anti-smoking initiatives they have promised under the agreement.
"It just gave them a $ 50-billion windfall," Durbin said.
"This is a clear indication that the tobacco lobby is strong. It's powerful," said Sen. Edward M. Kennedy
(D-Mass.), who said the provision was slipped into the massive tax bill behind closed doors. "The
tobacco lobby cannot stand the light of day."
2 of 2
08/04/97 16:17:29
Tax Bill Provision Helps Tobacco
http://www.washingtonpost.com/wp-srv/WAPO/19970801/V000616-080197-idx.hml
If you win our contest,
Sishere you go:
washingtonpost.com I home page I site Index I search I help I.
Tax Bill Provision Helps Tobacco
By Laura Meckler
Associated Press Writer
Friday, August 1, 1997; 2:34 a.m. EDT
WASHINGTON (AP) -- A new cigarette tax will not just
pay for children's health care. It will offset anything tobacco
companies might have to pay to settle health claims against
the industry.
The tax bill that the House and Senate finished Thursday
included a gradual increase of 15 cents a pack in the federal
cigarette levy and, in a last-minute revision, directed that
the extra revenue be credited toward whatever overall
tobacco settlement comes out of Congress.
The proposed agreement Congress is considering calls for
the tobacco industry to pay $368 billion over 25 years to
settle 40 state lawsuits.
Sen. Dick Durbin, D-Ill., who led an unsuccessful attempt
to strip the tobacco credit provision from the tax bill before
it passed the Senate, said that over 25 years the higher
cigarette tax would raise $50 billion.
``It just gave them a $50 billion windfall," Durbin said.
"This is a clear indication that tobacco lobby is strong,"
said Sen. Edward Kennedy, D-Mass., who said the
provision was slipped into the massive tax bill behind
closed doors. "The tobacco lobby cannot stand the light of
day."
The tobacco industry's spokesman on the settlement had no
immediate comment. White House spokesman Mike
McCurry said he was not familiar with the matter, and
officials at the Treasury and Health and Human Services
departments had no comment.
Sen. William Roth, R-Del., chairman of the Senate Finance
Committee, said removing the provision would have
1 of 3
08/04/97 17:12:31
Tax Bill Provision Helps Tobacco
http://www.washingtonpost.com/wp-srv/WAPO/19970801/V000616-080197-idx.Ihtml
created problems because the Senate version then would
have differed from the version the House passed on
Thursday. That would have caused further House action on
the bill.
``I do not believe we should delay this historic opportunity
that is within our grasp," Roth said. Durbin allowed that
most senators want to go home" for their August recess.
Sen. Daniel Patrick Moynihan, D-N.Y., voted against
removing the measure, calling it "a meaningless provision
with no binding effect."
But Durbin said the tobacco companies would argue that
Congress was on record in support of the credit.
Kennedy originally pushed for a 43 cent tobacco tax to
finance a new children's health program. That was cut in
half by a Senate committee and cut again in the final bill to
a 10 cent increase in 2000 and 5 cents more in 2002.
It is expected to raise about $5 billion over five years. The
children's health program will cost $24 billion over that
same period, with some $21 billion coming from the
general treasury.
Kennedy said he would work to overturn the provision,
possibly as the Senate debates the tobacco settlement itself.
Senate Majority Leader Trent Lott, R-Miss., has said that a
tobacco tax was inappropriate given that the settlement was
on the table. His spokeswoman, Susan Irby, said she did
not know if he was involved in getting the credit provision
added.
But she noted that the White House signed off on the entire
bill after reading the final language.
"Everything is in there because it's been agreed to by all
parties," she said.
Meanwhile, the American Medical Association said
Thursday that it would support the proposed tobacco
settlement if Congress toughened the deal.
Under the deal, the tobacco industry would pay $368
billion over 25 years, curb their advertising and oppose teen
smoking. In return, they won restrictions on Food and
Drug Administration nicotine control, a ban on class-action
lawsuits and protection against heavy jury verdicts.
2 of 3
08/04/97 17:12:31
Tax Bill Provision Helps Tobacco
http://www.washingtonpost.com/wp-srv/WAPO/19970801/V000616-080197idx.htm
The AMA said Congress must strengthen FDA control
over nicotine and the fines the industry would pay if teen
smoking didn't drop.
But the AMA broke from other health organizations to
back one industry requirement: That the FDA not be
allowed to ban nicotine for 12 years.
©
Copyright 1997 The Associated Press
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Office Furniture
Solutions.
3 of 3
08/04/97 17:12:31
deal5
http://www.kentuckyconnect.com/heraldleader/news/070297/deal/html/deal5.htm
The Business of Tobacco
Sales
Revenue
Cigarette
Big tobacco firms have diversified their portfolios to
sales in the
protect themselves against uncertainties of the future.
U.S. are a
Tobacco production is now only a part of the company
$45 billion
business. Revenue from tobacco compared to total
business.
revenue in 1996:
Tobacco
Industry
TOBACCO
TOTAL
TOBACCO
sales
REVENUE
REVENUE
AS
PERCENT
$20
billion
OF
TOTAL
Philip
$36.5 billion
$69.2 billion
53%
Morris
R.J.
$8.2 billion
$17.0 billion
48%
Reynolds
$40.4
Lorillard
$20.4 billion
2%
million
$447.5
$452.7
Liggett
99%
million
million
Return to top
Settlement Overview
Q&A
History of Tobacco Regulation
Opinion Poll
Learn More
Return to Tobacco Settlement front
1 of 1
07/22/97 16:37:28
Liggett debt pay delayed (8/1/97, The N&O)
http://www.news-observer.com/daily/1997/08/01/biz04.html
ncstormtrack.com
a hurricane trackingsite
COMPREMENSIVE STORM COVERAGE FROM WRAL AND THE N&O
NEWSSOBSERVER
Liggett debt pay delayed
Friday
August 1, 1997
DURHAM -- Liggett Group Inc. has postponed debt payments
that were due today and is still in negotiations with its bondholders.
BUSINESS I NEXT
STORY
The troubled cigarette manufacturer, based in Durham, was
scheduled to make interest payments on two notes. Liggett's
parent, Brooke Group Ltd. in Miami, announced Thursday that it
would not make those payments as scheduled.
Under terms of the notes, Liggett has a 30-day grace period
before it is in default, Brooke Group said.
Negotiations are continuing In June, Liggett said it entered
talks with bondholders to try to restructure its debt. The company
has $145 million in balloon payments due early next year and in
1999, but it hopes to put off payments until 2004.
The company's independent auditor warned in March that
Liggen was not generating enough cash to pay its debts Liggett's
cigarette market share has been declining for years
TOP I NEXT STORY 1
1 BUSINESS I DAY/FEATURES I EDITORIAL I NORTH CAROLINA 1 FOOD 1 "O" I SPORTS I TRIANGLE ]
1 From Page Triangls Guide ! Classified Online 1 Nando Times 1 luder Search Feedback I
NEWSSOBSERVER
Copyright 4: 1997 The News and Observer Publishing Company
Rahigh North Carolina
1 8f 1
08/01/97 16:03:32
Preducers of Tobacco Get Windfall in Tax Deal
http://www.nytimes.com/library/politics/080197tobacco-windfall.html
The New York Times
Men Behaving Badly
Politics
Touched by an Angell?
www.policy.com
Home
Sections
Contents
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Forums
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August 1, 1997
Producers of Tobacco Get Windfall in Tax Deal
Related Articles
Congress Approves Comprehensive Tax-Cutting Bill
Now Special Tax Breaks Get Hidden in Plain Sight
In Budget Deal, Clinton Keeps Welfare Pledge
News Analysis: New Attitudes on Aid to Immigrants
Nation's Capital to Get Aid but Lose Political Power
For Tobacco Companies, Budget News Is Mixed (July 30, 1997)
Coverage of the Budget Agreement
Coverage of the Tobacco Settlement
By BARRY MEIER
n a potential windfall for cigarette producers, new taxes paid by smokers will
save the tobacco industry billions of dollars by reducing the amount of
money companies would owe if the proposed tobacco settlement plan became
law.
Under a last-minute addition to the new budget deal, revenues generated by the
added tobacco taxes will be counted as credits toward payments by cigarette
companies if the $368.5 billion plan reached in June between tobacco producers
and state attorneys general takes effect.
It was known that industry lobbyists had been aggressively seeking such a
provision, but several lawmakers expressed anger Thursday on seeing its exact
language. In a final effort to derail it, Sen. Richard Durbin, D-Ill., introduced
language to strike the provision, but fellow lawmakers voted 78-22 to defeat the
motion.
"They are going to make $50 billion," Durbin said, "and it is a very smooth
move on their part."
The senator and others said the settlement's price tag would probably have to be
increased to reflect the effect of the new tax on the company's payments.
Under the budget agreement, Federal taxes on a pack of cigarettes, which
1 of 3
08/01/97 15:16:36
Producers of Tobacco Get Windfall in Tax Deal
http://www.nytimes.com/library/politics/080197tobacco-windfal.html
currently stand at 24 cents, would rise 10 cents in the year 2000 and 5 cents
more in 2002. That would produce $5.2 billion in new revenue over five years
and $16.7 billion over the next 10 years, which is currently scheduled to be used
to pay for health coverage for uninsured children.
Durbin said his $50 billion figure represented the amount of revenue generated
by the added taxes over the first 25 years of the tobacco settlement proposal.
Cigarette industry officials had initially fought an increase in cigarette taxes but
then supported the tax rise so long as the money was used as a credit against
payments they would make under the settlement plan. The industry's ability to
get the revenue proposal enacted into law had been viewed as a crucial test of
its political strength.
Industry lobbyists had argued privately that any new cigarette taxes should
offset additional contributions they should have made to federal healthcare
programs like Medicare. But if the proposal's $365.8 billion pricetag is not
increased to reflect the new budget provision, it will likely save the companies
billions of dollars.
Susan Irby, a spokeswoman for Sen. Trent Lott, the majority leader, said
Clinton administration officials had been involved in discussions about the
provision.
"To describe this as something that was done in the dead of night is
poppycock," Ms. Irby said.
Barry Toiv, a White House spokesman, acknowledged that the provision had
been discussed by Clinton administration officials during budget talks. But Toiv
added that the provision was not considered meaningful for the moment because
the amount of money the industry would pay has not been set.
"I don't think that the administration is going to be inclined to let this provision
reduce the industry's contribution in any way," Toiv said.
Separately, jury selection was scheduled to begin Friday in the state of Florida's
lawsuit against the tobacco industry. The state is seeking to recover billions of
dollars in Medicaid costs spent treating smoking-related illnesses. Jury selection,
which is taking place in Palm Beach, is expected to take at least a month.
Last month, Mississippi, the first state scheduled to go trial against producers,
settled its case for over $3 billion. But while negotiators for the Florida and the
tobacco industry have been in talks to settle that case they have run into
stumbling blocks. Along with money, Florida is demanding that the industry
make certain public health concessions and release confidential documents.
In a ruling on Wednesday, Judge Harold Cohen of Palm Beach Circuit Court
removed a crucial industry position by holding that tobacco companies could
2 of 3
08/01/97 15:16:36
Producers of Tobacco Get Windfall in Tax Deal
http://www.nytimes.com/library/politics/080197tobacco-windfal.html
not use a smoker's knowledge about the product's dangers as a defense.
Tobacco company lawyers said they would appeal the ruling.
Though tobacco companies and state attorneys general reached an agreement in
June on a tentative settlement plan, states can choose to press their lawsuits
while Congress considers turning the proposal into legislation.
Under the proposal, tobacco producers agreed to pay billions of dollars to settle
claims by states and smokers, agreed to marketing restrictions and agreed to pay
fines if youth smoking does not drop. In return, they would receive protection
against lawsuits and punitive damages.
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p
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C
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3 of 3
08/01/97 15:16:36
Tax Bill Provision Helps Tobacco
http://www.washingtonpost.com/wp-srv/WAPO/19970801/V000616-080197-idx.html
Federal Retirement Software
GOALWATCHER is at
www.GOALWATCHER.com
registered trademark
of SPANTEC, Inc.
washingtonpost.com I home page I site Index I search I help L
Tax Bill Provision Helps Tobacco
By Laura Meckler
Associated Press Writer
Friday, August 1, 1997; 2:34 a.m. EDT
WASHINGTON (AP) -- A new cigarette tax will not just
pay for children's health care. It will offset anything tobacco
companies might have to pay to settle health claims against
the industry.
The tax bill that the House and Senate finished Thursday
included a gradual increase of 15 cents a pack in the federal
cigarette levy and, in a last-minute revision, directed that
the extra revenue be credited toward whatever overall
tobacco settlement comes out of Congress.
The proposed agreement Congress is considering calls for
the tobacco industry to pay $368 billion over 25 years to
settle 40 state lawsuits.
Sen. Dick Durbin, D-III., who led an unsuccessful attempt
to strip the tobacco credit provision from the tax bill before
it passed the Senate, said that over 25 years the higher
cigarette tax would raise $50 billion.
It just gave them a $50 billion windfall," Durbin said.
``This is a clear indication that tobacco lobby is strong,"
said Sen. Edward Kennedy, D-Mass., who said the
provision was slipped into the massive tax bill behind
closed doors. "The tobacco lobby cannot stand the light of
day."
The tobacco industry's spokesman on the settlement had no
immediate comment. White House spokesman Mike
McCurry said he was not familiar with the matter, and
officials at the Treasury and Health and Human Services
departments had no comment.
1 of 3
08/01/97 15:17:39
Tax Bill Provision Helps Tobacco
http://www.washingtonpost.com/wp-srv/WAPO/19970801/V000616-080197idx.html
Sen. William Roth, R-Del., chairman of the Senate Finance
Committee, said removing the provision would have
created problems because the Senate version then would
have differed from the version the House passed on
Thursday. That would have caused further House action on
the bill.
``I do not believe we should delay this historic opportunity
that is within our grasp," Roth said. Durbin allowed that
most senators want to go home" for their August recess.
Sen. Daniel Patrick Moynihan, D-N.Y., voted against
removing the measure, calling it ``a meaningless provision
with no binding effect."
But Durbin said the tobacco companies would argue that
Congress was on record in support of the credit.
Kennedy originally pushed for a 43 cent tobacco tax to
finance a new children's health program. That was cut in
half by a Senate committee and cut again in the final bill to
a 10 cent increase in 2000 and 5 cents more in 2002.
It is expected to raise about $5 billion over five years. The
children's health program will cost $24 billion over that
same period, with some $21 billion coming from the
general treasury.
Kennedy said he would work to overturn the provision,
possibly as the Senate debates the tobacco settlement itself.
Senate Majority Leader Trent Lott, R-Miss., has said that a
tobacco tax was inappropriate given that the settlement was
on the table. His spokeswoman, Susan Irby, said she did
not know if he was involved in getting the credit provision
added.
But she noted that the White House signed off on the entire
bill after reading the final language.
"Everything is in there because it's been agreed to by all
parties," she said.
Meanwhile, the American Medical Association said
Thursday that it would support the proposed tobacco
settlement if Congress toughened the deal.
Under the deal, the tobacco industry would pay $368
2 of 3
08/01/97 15:17:39
Tax Bill Provision-Helps Tobacco
http://www.washingtonpost.com/wp-srv/WAPO/19970801/V000616-080197idx.hml
billion over 25 years, curb their advertising and oppose teen
smoking. In return, they won restrictions on Food and
Drug Administration nicotine control, a ban on class-action
lawsuits and protection against heavy jury verdicts.
The AMA said Congress must strengthen FDA control
over nicotine and the fines the industry would pay if teen
smoking didn't drop.
But the AMA broke from other health organizations to
back one industry requirement: That the FDA not be
allowed to ban nicotine for 12 years.
© Copyright 1997 The Associated Press
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NORDSTROM
3 of 3
08/01/97 15:17:39
Big Tobacco swings a deal in Senate on how proposed cigarette tax is used
http://www.journalnow.com/news/tobacco/baccy01.htm
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Tobacco
Current Business
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Big Tobacco swings a deal in
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cigarette tax is used
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JournalNow
Friday, August 1, 1997
THE ASSOCIATED PRESS
WASHINGTON
The money raised by a new cigarette tax would offset anything
tobacco companies would otherwise have to pay to settle health
claims against the industry, under a provision inserted into the tax bill
at the last minute.
The tax money, designed to pay for children's health, would be
credited toward any settlement of claims. The agreement Congress is
considering calls for the industry to pay $368 billion over 25 years to
settle 40 state lawsuits.
The Senate upheld the provision yesterday, 78-22, after Sen. Richard
Durbin, D-Ill., moved to strip it from the bill. He said that over 25
years, the cigarette tax would raise $50 billion, which tobacco
companies would not have to spend on the anti-smoking initiatives
they have promised under the agreement.
"It just gave them a $50 billion windfall," Durbin said.
"This is a clear indication that tobacco lobby is strong. It's powerful,"
said Sen. Edward Kennedy, D-Mass., who said that the provision
was slipped into the tax bill behind closed doors. "The tobacco lobby
cannot stand the light of day."
The tobacco industry's spokesman on the settlement had no
immediate comment.
1 of 2
08/01/97 15:18:22
Big Tobacco swings a deal in Senate on how proposed cigarette tax is used
http://www.jourmalnow.com/news/tobacco/baccy01.htm
Mike McCurry, the White House spokesman, said yesterday that he
was not familiar with the issue, and officials at the Treasury and
Health and Human Services departments had no comment.
Sen. William Roth, R-Del., the chairman of the Senate Finance
Committee, said that removing the provision would create problems
because the Senate version would differ from the House version.
Congress was finishing its work yesterday.
"I do not believe we should delay this historic opportunity that is
within our grasp," Roth said. Durbin noted that most senators "want
to go home" for their August recess.
The bill calls for a 10-cent increase in 2000 and 5 cents more in 2002.
It is expected to raise about $5 billion over five years. The children's
health program will cost $24 billion over that period.
JournalNow
© 1997, Piedmont Publishing Co. Inc.
2 of 2
08/01/97 15:18:22
B.A.T will hold its dividend for first time in 21 years
http://www.journalnow.com/news/tobacco/bat31.htm
Maybe they don't
know where to knock.
JoumalNow
Tobacco
Current Business
News
B.A.T will hold its dividend for
Recent Business News
first time in 21 years
Tobacco News
AP Business News
It anticipates paying more than expected in U.S.
tobacco settlement
JoumalNow
Thursday, July 31, 1997
BLOOMBERG NEWS
LONDON
B.A.T Industries Plc will leave its dividend unchanged for the first
time in at least 21 years and warned that it may have to pay more
than it expected in the U.S. tobacco industry's settlement of
health-related lawsuits
The move came as the tobacco and financial services company, based
in London, said that net income fell 15 percent in the second quarter,
held back by the stronger pound and lower tobacco profit in key
markets in the United States and Asia.
B.A.T shares fell 3.8 percent. The decision to hold the first-half
dividend at 10 pence broke a pledge to keep raising the payout above
the rate of inflation It also comes a week after B.A.T agreed to buy
Mexican cigarette maker CLM for $1.7 billion, which will further
stretch 116 balance sheet
"Shareholders HEO getting a bit of a raw deal, said Martin Ayres, #
fund manager with ANA Equity & Law. which holds about 19 $
million B AT shares "Obviously the management are extremely
worried about what she cash flow of chin company is going to look
like
BAT said it hars that opponents could force higher payments on
tobacco companies before the U.S. Congress approves the
lof2
08/01/97 16:08:31
B.A.T will hold its dividend for first time in 21 years
http://www.journalnow.com/news/tobacco/ba31.htm
settlement, which was proposed last month and would see the
companies pay $368.5 billion over 25 years.
"The industry is clearly passing through a valley of uncertainty,"
Chairman Lord Cairns told analysts at a London briefing. "This is the
moment to pause in our dividend policy and wait until the mist lifts."
He said that B.A.T is confident of paying a final dividend of at least
16 pence to match last year's total of 26p, adding that the persistent
strength of the pound in the past year played a smaller role in the
decision to hold the dividend.
"If there was another issue, it's the fact that earnings were down,"
said Martin Broughton, B.A.T's chief executive. "That was another
cautionary element in the overall picture." He said that B.A.T had not
held its dividend since at least 1976, when the holding company was
formed.
B.A.T shares closed down 20.5 pence at 519.5 after earlier falling as
much as 24p. About 15 million shares traded, compared with a
three-month daily average of 6.4 million.
B.A.T. with brands such as Lucky Strike and Pall Mall, is the world's
second-biggest cigarette-maker after Philip Morris
Some observers said that the decision to hold the dividend may be at
least partly political, to help convince opponents of the settlement
that it is causing real pain.
JournalNow
AVENT Predmont Publishing Co Inc
2 of 2
08/01/97 16:08:32
Boston Globe Online / Nation ! World / Tobacco deal cited as boon for CEOs http://www.boston.com/dailyglobe/globeht./fobacco_deal_cited_as_boon_for_CEOs.htm
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National
Study says taxpayers lose with settlement
International
Washington, D.C.
By Bob Hohler, Globe Staff, 07/31/97
WORLD REPORTS
Middle East
WASHINGTON - While taxpayers and some industries could take a
Far East
beating under the $368.5 billion tobacco settlement plan, leaders of the
Latin America
largest cigarette companies would stand to gain more than $200 million
Russia
in stock profits, according to Senate testimony and a new study released
Europe
yesterday
Africa
Canada
If Congress and President Clinton approve the landmark tobacco pact,
the industry's top 15 executives will make an extra $206 million, if their
stocks increased the 46 percent that same Wall Street analysts have
Table of Contents
predicted, a report by the Institute for Policy Studies found.
A Florida judge deals a blow to tobacco companies fighting a
billion-dollar Medicaid lawsuit. AS,
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The biggest winner would be Geoffrey C. Bible, the CEO of Philip
Morris, whose stock options would rise nearly $73 million.
Today
Yesterday
With this in mind, members of Congress should use caution in
evaluating the tobacco settlement to ensure that the tobacco executives
are not using smoke and misrors to obtain a deal that favors their own
personal interests above those of public health. the report concluded
Sections
The study was released as a Senate panel convened to examine other
potential winners, and losers. under the settlement agreement that the
tobacco industry reached last month with 40 state attorneys gener al and
trial lawyers
Notable among the potential losers were federal taxpayers who.
withouts said, would continue to bear billions of dollars in health care
COME for smoking-related diseases.
Under the agreement. the tobacco industry would cover the
smoking-related expenses of state-run Medicaid programs. But the pact
CLASSIFIEDS
did not provide for the costs incurred hv federal programs such as
1 of 3
08/01/97 15:27:09
Boston Globe Online / Nation I World / Tobacco deal cited as boon for CEOs http://www.boston.com/dailyglobe/globeht./Tobacco_deal_cited_as_boon_for_CEOshtm
LATEST NEWS
Medicare and the Veterans Administration
Low-graphics version
Dr. Jeffrey E. Harris, a physician at Massachusetts General Hospital
who teaches economics at the Massachusetts Institute of Technology,
told the Senate Judiciary Committee that Medicare costs alone for
smoking-related illnesses amount to an estimated $9.3 billion a year, or
$192 billion over the next 25 years.
'That number vividly demonstrates the inadequacy of the dollar amount
of the current settlement," said Senator Edward M. Kennedy.
Massachusetts Attorney General Scott Harshbarger, who helped broker
the settlement, defended the proposal.
Responding to the study on the executives' stock options, Harshbarger
spokesman Ed Catasw used If Congress were to approve this
settlement today, the taxpayers of Massachusetts would receive up to
$500 million a year from big tobacco every year forever. That's not
#
stock option It's like a tax cut for every person in the state forever
The Senate panel also heard from the advertising and convenience store
industries whose spokesmen said they would suffer under the
settlement
Advertisers said the industry does more than $3 billion a year in tobacco
business, much of which would be eliminated under restrictions required
by the settlement
has Mony IN on page of the Boston Globe on 07/31/97
1997 Cloho Newspaper Company.
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2 of 3
08/01/97 15:27:10
Yahoo! - Cigarette tax could be part of overall deal
http://biz.yahoo.com/finance/97/07/31/y0012_y00_12.html
YAH$
REUTERS
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Thursday July 31 10:57 PM EDT
Cigarette tax could be part of overall deal
By Joanne Kenen
WASHINGTON, July 31 (Reuter) - In a move blasted by tobacco critics, the U.S. Congress voted on
Thursday to include the new cigarette tax for children's health care in any eventual nationwide settlement
for tobacco litigation.
The cigarette tax increase -- 10 cents a pack in the year 2000 and another five cents in the year 2002 --
was approved by the House of Representatives and Senate as part of a sweeping budget spending bill.
The money is supposed to help cover children with no health insurance.
The provision about taking the tax out of any eventual tobacco settlement was later inserted under the
``miscellaneous provisions" section of the companion tax-cut bill.
Oklahoma Sen. Don Nickles, the deputy Republican leader of the Senate, said he thought it had been
``inadvertently left out" of the spending bill and therefore added to the tax bill. He said the idea of linking
the tax to the settlement had been part of the budget negotiations with the White House.
Calling it a `dirty trick," Sen. Frank Lautenberg, a New Jersey Democrat, said, "This is yet another sign
that we can't take what the tobacco lobby says or promises in good faith.
``There was nothing miscellaneous about this add-on," said Sen. Dick Durbin, an Illinois Democrat. ``It
was a calculated move by an industry which still has plenty of friends on Capitol Hill."
Tobacco foes said they would try to counter this move by raising the amount of money the industry
would have to pay out in the overall settlement, now pegged at $368 billion over 25 years. The current
tax is 24 cents per pack.
The cigarette tax increase, backed by Republican Sen. Orrin Hatch of Utah and Democrat Sen. Edward
Kennedy of Massachusetts, was not originally linked to a tobacco deal. The Senate backed a 20 cent hike,
but it was scaled back in negotiations with the House.
Congress after its August recess is expected to begin hearings on the proposed tobacco settlement, which
would settle 40 state lawsuits and a slew of class actions against the industry. The settlement would have
to be enacted by Congress.
1 of 2
08/01/97 15:19:10
Yahoo! - Cigarette tax could be part of overall deal
http://biz.yahoo.com/finance/97/07/31/y0012_y00_12.hml
One of our challenges we have before us is to determine whether we're going to have a tobacco bill, and
we'll be working on that. But if we do and it has a tax component, this tax increase would be credited to
it," Nickles said.
One Democrat said, ``I don't really understand why the Republicans did this, it shows they are doing the
bidding of the tobacco lobby and makes them look like cretins."
More news for related categories and industries: food/beverages, household, insurance, leisure, tobacco,
stock capsules, options.
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2 of 2
08/01/97 15:19:11
For Tobacco Companies, Budget News Is Mixed
http://www.nytimes.com/library/politics/0730budget-cigaretes.html
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July 30, 1997
For Tobacco Companies, Budget News Is Mixed
By BARRY MEIER
F
or tobacco companies, the 15 cent federal excise tax increase in the price
of a pack of cigarettes may prove to be a mixed blessing.
Cigarette makers have traditionally fought any proposals to increase tobacco
taxes, which currently stand at 24 cents a pack, and have been generally
successful in beating back such efforts.
But this year, producers first faced a threat when Sens. Orrin Hatch of Utah, a
Republican, and Edward Kennedy of Massachusetts, a Democrat, proposed
raising cigarette taxes by 20 cents a pack to finance health coverage for
uninsured children. That bill was defeated, and although House Speaker Newt
Gingrich opposed a tax increase, the White House backed a 20 cent increase and
the Senate passed legislation for it.
The tobacco industry was successful in knocking 5 cents off that proposal. The
current plan would raise cigarette taxes by 10 cents a pack in the year 2000 and
add 5 cents in 2002 -- meaning that a two-pack-a-day smoker would be paying
about $110 a year more than at present.
The critical question is whether the $5.2 billion raised by the new cigarette taxes
over the next five years will be credited against the $368.5 billion proposed
settlement reached last month between tobacco companies and state attorneys
general.
Industry sources were uncertain Tuesday what the answer would be.
Home I Sections Contents Search I Forums I Help
Copyright 1997 The New York Times Company
1 of 2
08/01/97 15:16:48
Chicago Tribune : WARNING: TOBACCO PACT IS HAZARDOUS TO NATIOttp://www.chicago.tribune.com/print/per.tive/9707/27/perspective/9707270350.hml
Chicago Tribune
PAGE ONE * NEWS $ SPORTS , STOCKS TECH, TEMPO * TRAVEL
OPINION
JOBS I HOMES 1 CARS ) WEATHER i TV i FEEDBACK
THE PRINT
Perspective - The week in review
EDITION
Return to
WARNING: TOBACCO PACT IS
Perspective
HAZARDOUS TO NATION'S
HEALTH
OPINION
Editorials
Voice of the
By Haskel Benishay. Haskel Benishay teaches
People
macroeconomics and management classes in the Kellogg
Commentary
Graduate School of Management
Perspective
Web-posted Sunday, July 27, 1997; 6:11 a.m. CDT
News
I am an ex-smoker. I believe smoking is unhealthy and
unattractive. I do not advocate smoking for anybody. I also am a
professor of managerial economics at Northwestern University,
Financial
and my abhorrence of smoking does not lead me to believe that
severe punishment of the tobacco industry is sensible or good for
the country.
Sports
The recent pact between 40 state attorneys general and tobacco
Tempo
industry executives contains several extreme and harmful
features, and it reflects incorrect assumptions.
Index
The pact imposes a fine on the industry of $368.5 billion to be
paid over 25 years, about $14.7 billion per year. The industry
earns about $7 billion a year. Under current conditions, the
SUBSCRIBE
industry will end up with a yearly shortfall of about $7.7 billion.
Get home
This is an untenable situation.
delivery of the
Chicago Tribune
print edition
If the pact is approved by Congress and the president, the
cigarette companies certainly will be compelled to increase the
price of cigarettes substantially. In my judgment, even with a
substantial price increase, the industry will not be able to pay the
$14.7 billion annually. An increase in price will cause a
commensurate decrease in volume. Total revenue will remain the
same or increase only slightly. The shortfall will remain and will
bring about bankruptcies of the cigarette companies.
The projected increase in the price of cigarettes will encourage
1 of 3
07/28/97 12:35:18
Chicago Tribune : WARNING: TOBACCO PACT IS HAZARDOUS TO NATIOlhttp://www.chicago.tibune.com/print/per.tive/9707/27/perspective/9707270350.html
illegal production of domestic cigarettes. It also is sure to foster
cigarette smuggling into the U.S. from neighboring countries, as
well as from distant countries where tobacco is grown and
processed. We will face an increase in domestic law-breaking and
in contraband imports.
The pact requires the industry to ensure that teen smoking is
reduced over time. If teen smoking does not decrease, the
industry will be punished. This is a strange and unrealistic
requirement. The industry has only limited control over teen
smoking, which spreads mostly because of psychological teenage
factors. The tobacco companies committed a grave error by
agreeing to such a requirement.
To a large extent teenage smoking is a way for teenagers to rebel
and assert their autonomy. Reduced advertising and elimination
of cigarette vending machines--changes that are part of the
agreement--will make little difference. Ignoring these factors
reflects ignorance on the part of cigarette-makers.
The agreement requires that the tobacco industry reduce its
advertising drastically. This requirement is unconstitutional. It
restricts commercial speech and therefore is on a slippery slope
leading to a suppression of political speech.
The fact that cigarette-makers agreed to the Draconian terms of
the agreement is puzzling. It is highly likely that cigarette
company executives agreed to their own industry's death warrant
because they felt psychologically defeated and exhausted. That's
not a good reason to yield.
The projected bankruptcies of cigarette companies in turn will
cause bankruptcies for hundreds of thousands of tobacco farmers.
Very little has been said to date by the attorneys general, tobacco
executives or elected federal officials about the future plight of
the tobacco farmer.
The pact implies that smoking is the sole cause of various
illnesses, although, in fact, smoking is one of several contributors
to them. Medical research has shown that lack of exercise, the
consumption of animal fat in milk and meat, excessive alcohol
consumption, as well as air pollutants, also are contributors to
health problems.
Because smoking is only one of several factors, it is unfair to
single out the tobacco industry.
Cigarette companies are punished for contributing to an increase
2 of 3
07/28/97 12:35:19
Chicago Tribune : WARNING: TOBACCO PACT IS HAZARDOUS TO NATIOhtp://www.chicago.tribune.com/print/per..tive/9707/27/perspective/9707270350.html
in illnesses due to the nicotine component in their product. In the
same vein it is logical to argue that because the milk and meat
industries also contribute to illnesses due to the animal fat in their
products, they should be punished--a first step in another slippery
slope?
If one smokes more and eats less, one may reduce the risk of
illnesses resulting from being overweight. Therefore, smoking is
not all bad.
Addiction to hard drugs is far more harmful than smoking.
Smokers do not rob and steal to maintain their habit. Hard-drug
addicts do. The current zealous anti-smoking campaign removes
the focus from the fight against hard drugs. It gives the politicians
and the public a sense of doing good while the fight against hard
drugs is neglected.
There is an implicit assumption in the recent agreement that
cigarette companies are to blame for smoking and that smokers
are innocent victims who do not have the responsibility to kick
their habit. This point of view will justify continuation of
smoking. Smokers will say, "The cigarette companies are to
blame. They made me start and continue smoking. Not quitting is
not my fault." Continuation of smoking is likely to be an
undesirable consequence of the agreement.
The punishment meted out in the agreement is likely to result in
dire consequences for employments and livelihoods in the
tobacco industry and in industries directly and indirectly related
to tobacco. My hope is that Congress will understand the harmful
effects of the agreement and will not ratify it.
[ Top of Page Return to Perspective I Index I Feedback ]
© 1997 Chicago Tribune
3 of 3
07/28/97 12:35:19
Columbia Directors
Jury Orders Dallas Diocese
UST Posts 2% Decline in Profit, Plans
Meet on Departure
To Pay Almost $120 Million
Of Chairman Scott
DALLAS (AP) - In what is believed to
Marketing Push for Smokeless Tobacco
be the largest verdict of its kind, the
ald
Roman Catholic Diocese of Dallas was
By SUEIN L. HWANG
unchanged, in composite trading on the
ordered to pay nearly $120 million for
Staff Reporter of THE WALL STREET JOURNAL
New York Stock Exchange.
to
Continued From Page A3
allowing a priest to molest altar boys and
The big smokeless-tobacco maker UST
UST also formally announced market-
1994, in the minds of most in Nashville the
then conspiring to cover it up.
Inc. reported a 2% drop in second-quarter
ing and sales initiatives designed to-beat
company has remained inextricably linked
The lawsuit was brought by 10 men
earnings and unveiled several counter-
back rivals who have been steadily eating
ny
to the Frists. Even today the company is
the clergyman was accused of molesting
punches against cheaper brands, includ-
away at its market share, which for
Mr.
often referred to by many in Nashville, not
and the family of an 11th alleged victim
ing test-marketing of a new discount
many years topped the 80% mark. For
as Columbia/HCA. but as "HCA/Colum-
who committed suicide.
snuff called Red Seal and one-time price
years. UST easily dominated the market
bia.
Their lawyers contended that the dio-
promotions for older products.
with such longtime favorites as Copenha-
"It doesn't matter how many different
cese had ignored evidence that the Rev.
The Greenwich, Conn., company said
gen and Skoal. But more recently, the
companies Columbia acquires, you'll never
Rudolph Kos was molesting boys. The
quarterly net income fell to $116.9 million,
company's user base has been eroding at
be able to separate the Frist name from
diocese didn't dispute the molestation
or 64 cents a share, from $119.1 million, or
the hands of far-cheaper discount brands
it," says Tom Perdue. who ran the winning
claims but denied it was negligent or
62 cents a share, a year earlier. Per-share
as well as Conwood Co.'s Kodiak, a winter-
U.S. Senate campaign of Bill Frist, the
engaged in a coverup.
earnings rose because of a 5% drop in the
green-flavored snuff that's been stealing
&
youngest of the Frist sons. "In Nashville
The state court jury awarded about
number of shares outstanding. Sales rose
away younger dippers in droves.
you'll never be able to untie it. So when
$101 million in compensatory damages
4% to $365.1 million.
"In the past, UST didn't give either
Columbia makes a mistake or is criticized,
and $18 million in punitive damages.
Wall Street had been warned that
volume or coupon discounts. but it has
to
no one takes it harder than the Frists."
Church officials said they will appeal.
UST's second quarter would be a difficult
entered a new way of doing business,' Mr.
When Columbia's image began to tar-
The jury agreed that the diocese was
one. "There's been strong growth in the
Feldman said. Added Oppenheimer's Roy
Mr.
nish, the Frist family took it personally,
negligent in its handling of the priest,
discount segment, which has really hurt
Burry: "The cost of these programs rela-
say those close to the family.
lied about him, inflicted emotional dis-
the company," said Smith Barney's Mar-
tive to their volume benefits remains in
Image Overrides Stock Price
tress on the plaintiffs and committed
tin Feldman, who estimates the discount
question.'
"How the company behaves publicly
fraud.
segment of the market could grow to 11%
As previously reported. the company
and how it is perceived in Nashville is more
Diocesan lawyer Randal Mathis said
by the end of next year from 9% today.
said it will begin test marketing a discoun]
important to the Frists than the stock
Catholic officials were "good people"
Yesterday, UST stock closed at $28.625.
snuff called Red Seal, which will be
price," says one former HCA director who
who wrongly concluded that Father Kos,
launched in selected markets where dis-
is also close to the Frist family.
who now lives in San Diego, wasn't
Dr. Frist was listed as owning more
Today's Man to File
count brands are doing well, at a special
engaged in sexual misconduct.
list price below. that of most discount
than. 14 million-shares, according to Co-
brands. The company confirmed to ana-
lumbia's latest proxy statement, dated
hospital administrators in big Columbia
New Repayment Plan
lysts yesterday that in some of those
1r.
April 14. Donald S. MacNaughton and R.
markets, such as Denver, quit en masse.
select markets it will offer 50-cents-off
Clayton McWhorter each were listed as
Mr. Scott also began to lose support
Offering Stock, Cash
coupons on Copenhagen and Skoal, which
owning more than 550,000 shares, while
among some Columbia doctors and execu-
it says will prevent customer defections to
the
William T. Young was listed with about
tives, some of whom still had close ties
the cheaper Red Seal product.
are
950,000 shares. according to the proxy
to executives from HCA and HealthTrust,
UST unveiled other strategies, includ-
the
By a WALL STREET JOURNAL Staff Reporter
statement. Mr. Scott was listed as owning
which Columbia acquired in 1994 and 1995,
MOORESTOWN, N.J. - Menswear re-
ing two special quarterly promotions in the
about nine million Columbia shares in
for
respectively. Word of those concerns some-
tailer Today's Man Inc., unable to finance
rest of 1997 in which customers can buy
the latest proxy material.
times filtered up to Columbia's three direc-
an all-cash recovery to creditors in its
four-can packs of Copenhagen and Skoal
Neither Dr. Frist nor other Columbia
tors from those acquisitions: Dr. Frist,
bankruptcy proceedings, said it intends to
Wintergreen at a one-time reduced price.
directors. could be reached for comment
former chairman and chief executive of
file an amended plan of reorganization
People familiar with the company say UST
yesterday.
HCA; Mr. MacNaughton, HealthTrust's
shelved consideration of across-the-board
offering creditors some stock as well.
In composite trading yesterday on the
former chairman of the executive commit-
Today's Man has been operating under
discounts because of sensitivities raised by
New York Stock Exchange, Columbia,
tee; and Mr. McWhorter. HealthTrust's
Chapter 11 of U.S. bankruptcy law since
the proposed tobacco-industry settlement.
which has a market value of $24 billion,
former chairman and chief executive.
February 1996. In a previously filed plan.
If enacted, the settlement is expected to
closed at $36.25, down 6.25 cents. Tenet
Meanwhile, Columbia and Tenet are
Today's Man had offered creditors $68
raise prices of smokeless-tobacco brands
closed at $30, down 12.5 cents. The Santa
trying to resolve how to take into account
million in cash, a 100% recovery on their
by 15 cents a can - a move that would
at
Barbara, Calif., company is valued at
potential fines that Columbia would pay if
claims. Yesterday, the company said it
please critics who believe price increases
$9 billion.
it had to settle potential criminal or civil
plans to offer cash plus an undisclosed
are an effective way to keep children from
While disclosure of the merger talks
charges, say people familiar with the situ-
equity stake that it said would be valued at
experimenting with tobacco.
tly
has boosted both companies' shares, the
ation.
$15 million. The company said the total
UST said it plans to launch a new
no
discussions appear unlikely to erase the
The problem for Tenet is that giving
value would still be $68 million.
marketing campaign focusing on the fresh-
investigation of Columbia. which is enter-
Tenet shareholders "contingent" value de-
The company said it would file an
ness of Copenhagen, a snuff brand still
ns
ing into full swing.
pendent upon legal proceedings could
amended plan by Wednesday and expects
packaged in cardboard cans and stamped
Some government officials are deter-
make a pooling-of-interest accounting
to emerge from bankruptcy proceedings in
with a manufacture date. The company
mined to take a hard line on any alleged
treatment difficult, analysts and experts
time for the Christmas selling season.
said it is considering test-marketing a
violations of federal law by Columbia,
say. Under Internal Revenue Service
The retailer said it will finance the plan
sweeter, wintergreen-flavored snuff to
according to people familiar with the in-
rules, stock issued in a pooling merger
with $42.5 million in debt, $10 million in
compete with Kodiak later this year.
in
vestigation.
can't have "contingent" consideration
cash on hand, and $16 million raised
In a previous case against National
such as extra value or stock whose valued
through an equity rights offering to share-
ALLEGHENY POWER SYSTEM INC.
he
Medical Enterprises Inc., which was re-
is tied to a particular event, according
holders and an investment group led by the
Allegheny Power System Inc. reported
named Tenet, the government collected
to Robert Willens, a tax and accounting
company's chairman, David Feld. Law-
that second-quarter net income was down
$380 million in fines and other payments.
expert at Lehman Brothers Inc.
rence Gottlieb, an attorney for the credi-
3.9%, primarily because of cooler-than-nor-
id
However, top officials of National Medical
So-called pooling is important because
tors, said creditors will evaluate whether
mal spring weather, which reduced de-
nd
weren't subject to criminal prosecution.
an acquirer avoids goodwill charges - the
the equity offered to creditors is valued at
mand for electricity. The Hagerstown,
Federal investigators now believe that
difference between book value and the
the same rate as that offered to the share-
Md., utility's net fell to $51.7 million, or
n-
the outcome in that case sent the wrong
prices paid - that would be deducted from
holders and management group. Creditors
42 cents a share, from $53.8 million, or 44
ite
signal - that people are able to resolve
earnings. Though largely cosmetic. pur-
still seek an additional $9 million in inter-
cents a share. a year earlier. Per-share
ge
fraud investigations by paying a substan-
chase-accounting hurts reported earn-
est on their claims.
earnings reflect a larger number of shares
W-
tial penalty. As a result, officials may well
ings.
Shares of Today's Man fell 8.2%. or 25
outstanding in the recent quarter. The
nd
press for criminal prosecution of individ-
Tenet wants to protect its shareholders
cents, to close at $2.8125 in Nasdaq Stock
results were two cents below a First
a
uals, if they believe they have a strong
if the liability ends up in the billions of
Market trading.
Call consensus of analysts' estimates. Alle-
enough case.
dollars. Mr. Barbakow has received high
A Today's Man spokeswoman yester-
gheny shares were unchanged at $28.50 in
However, the Columbia investigation
marks for navigating what had been Na-
day said the amended recovery proposal
New York Stock Exchange composite trad-
still has a long way to go. One top law-en-
tional Medical Enterprises through a fed-
would "give the company a healthier bal-
ing. Revenue dropped 1.5% to $542.8 million
forcement official observed: "The diffi-
eral investigation a few years ago. Still,
ance sheet. with not as much debt" when it
from $550.9 million. For the six months,
culty with major cases is that you never
the investigations are continuing and
emerges from bankruptcy-court proceed-
Allegheny's net rose 23% to $129.3 million:
0-
know how they. going to develop. It could
there are no signs of settlement talks at
ings.
revenue fell 3.4%.
be a joint national prosecution. it could be
this point
WSJ
7/25/97
Fri
tobacco
A4
Earnings at Philip Morris
Philip Morris Cos.
(MO,N)
RJR Nabisco Result
Qtr. to June 30 1997
1996 %Ch
Were Strong in 2d Quarter
Rev. 18,413,000,000 17:509,000.000 +5.2
Net inc. 1,836,000,000
1,621,000,000
+13.3
By GLENN COLLINS
Sh earn
76
66
Sh. out. 2,423,000,000 2,470,000.000
Qtr. to June
analyst for Paine Webber.
The share earnings and shares outstanding
The RJR Nabisco Holdings Corpo-
By GLENN COLLINS
Domestically, the company sold 5
were adjusted for a 3-for-1 stock split in 1997.
Sales
4,286.0
Revenues are operating revenues.
ration reported strong international
Net inc.
percent more cigarettes in the sec-
The results are for the second quarter.
tobacco volumes yesterday for its
Sh earn
The Philip Morris Companies an-
ond quarter than it had in the compa-
second quarter, but its results were
b-Net loss. wh
nounced strong second-quarter earn-
rable quarter last year, amounting to
Yesterday's closing price:
$42.625
marred by continuing erosion of the
million fromres
ings yesterday, reflecting significant
60.8 billion cigarettes. Operating in-
$2.125
company's domestic cigarette busi-
at Nabisco. Ex
$219 million.
gains in domestic tobacco profits and
come from tobacco in the United
ness.
(Loss)
market share as well as in interna-
States was $1.2 billion, 11.6 percent
Including after-tax restructuring
The results are
tional sales.
higher a year earlier.
Operating income at the compa-
charges of $246 million, RJR Nabisco
Net income rose 13.3 percent, to
Worldwide, the company sold 238
reported net income of $243 million,
Yesterday's C
billion cigarettes in the second quar-
ny's Kraft Foods unit in North Amer-
$1.83 billion, or 76 cents a share, from
or 71 cents a share, in the quarter,
$1.62 billion, or 66 cents a share, in
ter, 6.8 percent more than a year
ica grew 12.4 percent "due to the
compared with a loss of $27 million,
earlier. Worldwide volume for the
consolidation of the food business,
the corresponding quarter a year
or 11 cents a share, in the quarter a
earlier. Sales grew 5.2 percent, to
Marlboro brand was up 5.4 percent.
volume growth and some pricing,"
year earlier. The earnings matched
pany's bran
$18.4 billion from $17.5 billion.
In Central and Eastern Europe,
Mr. Feldman said.
the 71-cent consensus of 13 analysts
ting pressu
Earnings for the second quarter
volume was up 10.5 percent, to 47
"The moves they've made over the
polled by First Call.
troduced b
matched the First Call consensus of
billion cigarettes. And in France,
last few years are paying off for
In the quarter, RJR Nabisco sales
of Compag
76 cents a share estimated by 16
sales were up two-tenths of 1 percent
Kraft," Mr. Goldman said, "includ-
rose nearly 2 percent, to $4.286 billion
A.G. of Sw
analysts. Shares of Philip Morris
despite the successful introduction of
ing the way in which they've taken
from $4.203 billion.
RJR Nabis
rose $2.125 each yesterday, closing at
a value-oriented new brand by Roth-
traditional, ho-hum brands and made
Steven F. Goldstone, RJR Nabis-
Domesti
$42.625 on the New York Stock Ex-
mans, a subsidiary of Financière Ri-
them exciting."
co's chairman and chief executive,
Camel and
change.
chemont A.G. of Switzerland.
But at the company's international
said in a statement that the quarter
best perfor
The second-quarter results were
Philip Morris's gains in interna-
food division, volume was down 1
"keeps the company on track for a
percent, r
"a remarkable performance, given
tional results came despite the
percent, Mr. Feldman said, though
solid 1997." He added that the prob-
was down
an overall shrinking cigarette mar-
strengthening of the American dollar
operating profit margins improved
lems for the quarter included "soft-
pany's Sale
ket," said Martin Feldman, a tobac-
against European currencies and the
to 10.9 percent in the second quarter
ness in Nabisco International and
cent in vol
CO analyst at Smith Barney.
Japanese yen, which makes Ameri-
from 10.3 percent a year earlier.
negative foreign currency impact in
Volume
For the second consecutive quar-
can goods relatively more expensive.
the overseas tobacco business."
At the company's Miller Beer unit,
clined 4) p
ter, retail-store data from the A.C.
During the quarter, which ended
RJR Nabisco shares rose $1.0625
sales, in volume terms, were up 3.1
rose 4 per
Nielsen Company showed that Philip
June 30, the company agreed to be
percent, to 12.4 million barrels, "a
yesterday, to $30.875, in trading on
pared with
Morris's share of cigarette sales in
part of the tentative June 21 tobacco
the New York Stock Exchange.
er.
settlement agreement that is now
very good performance," Mr. Feld-
the United States exceeded 50 per-
Overall tobacco volume rose 6 per-
"There
man said.
cent. In the second quarter the total
being debated in Congress. The set-
cent, with the bright spot in the quar-
the don
was 51.1 percent. The share of retail
tlement would require cigarette
Among key brands, shipments of
ter being the company's internation-
Martin Fe
sales for the company's Marlboro
companies to pay $368.5 billion over
Miller Lite rose 3.6 percent in vol-
al tobacco volumes, which rose 13
with Smith
brand rose 1.8 percentage points, to
the next 25 years to compensate
ume, and Miller High Life shipments
percent, led by cigarette volume in
ly, RJR Na
35.2 percent.
states for the costs of treating smok-
were up 10 percent. "The company's
the former Soviet Union, which was
Philip Mor
"Marlboro was the driving force of
ing-related illness and to finance na-
new advertising seems to be work-
up 37 percent, and in Asia, where the
the company's cigarette business,
tionwide anti-smoking programs.
ing," Mr. Feldman said:
Salem brand's volume grew 19 per-
amounting to more than 60 percent"
cent.
of its volume in the United States,
In France, RJR Nabisco's leading
said Emanuel Goldman, a securities
NYT
GIVE TO THE FRESH AIR FUND
country in Western Europe, the com-
Strugg
Wed 7/23/97 D2
B
SAN FR
Informix
been strug
Looking to build your business!
unexpected
named Rd
dent and d
Finocchio,
at the BCa
Phillip E. V
1
chairman.
Informix
D2
THE NEW YORK TIMES, WEDNESDAY, JULY 23, 1997
Morris
Philip Morris Cos.
(MO,N)
RJR Nabisco Results Meet Expectations
Qtr. to June 30 1997
1996
%Ch
2d Quarter
Rev.
18,413,000,000
17,509,000.000
+5.2
Emanuel Goldman, a securities
Net
inc.
1,836,000,000
1,621,000,000
+13.3
By GLENN COLLINS
Sh. earn
76
.66
RJR Nablsco Holdings Corp.
(RN,N)
analyst with Paine Webber, agreed,
Sh. out. 2,423,000,000 2,470,000,000
Qtr. to June 30 1997
1996 %Ch
saying that the problem in RJR Na-
malyst for Paine Webber.
The share earnings and shares outstanding
The RJR Nabisco Holdings Corpo-
bisco's domestic tobacco business
Sales
4,286,000,000
4,203,000,000
+1.98
Domestically, the company sold 5
were adjusted for a 3-for-1'stock split in 1997.
ration reported strong international
Net
inc.
243,000,000
b27,000,000
"is primarily that Marlboro is going
Revenues are operating revenues.
percent more cigarettes in the sec-
tobacco volumes yesterday for its
Sh. earn
71
(11)
like a house afire." Marlboro is made
The results are for the second quarter.
and quarter than it had in the compa-
second quarter, but its results were
b-Net loss, which included a charge of $246
by the Philip Morris Companies.
table quarter last year, amounting to
Yesterday's closing price:
$42.625
marred by continuing erosion of the
million from restructuring and related expenses
On July 10, after the end of the
10.8 billion cigarettes. Operating in-
company's domestic cigarette busi-
at Nabisco. Excluding the charge, income was
$2.125
second quarter, the R. J. Reynolds
$219 million.
come from tobacco in the United
ness.
(Loss)
Tobacco Company announced that it
States was $1.2 billion, 11.6 percent
Including after-tax restructuring
The results are for the second quarter.
would discontinue its Joe Camel
higher a year earlier.
charges of $246 million, RJR Nabisco
campaign, replacing the cartoon fig-
Operating income at the compa-
Worldwide, the company sold 238
reported net income of $243 million,
Yesterday's closing price.
$30.875
ure with stylized versions of Camel
ny's Kraft Foods unit in North Amer-
illion cigarettes in the second quar-
or 71 cents a share, in the quarter,
$1.0625
cigarettes' original camel trade-
6.8 percent more than a year
ica grew 12.4 percent "due to the
compared with a loss of $27 million,
mark. The unexpected decision,
arlier. Wörldwide volume for the
consolidation of the food business,
or 11 cents a share, in the quarter a
which analysts said was related to
Marlboro brand was up 5.4 percent.
volume growth and some pricing,"
year earlier. The earnings matched
pany's brands came under price-cut-
the proposed tobacco settlement be-
In Central and Eastern Europe,
Mr. Feldman said.
the 71-cent consensus of 13 analysts
ting pressure from a new brand in-
ing debated in Congress, ended a
'olume was up 10.5 percent, to 47
"The moves they've made over the
polled by First Call.
troduced by Rothmans, a subsidiary
nine-year run for Joe Camel on bill-
illion cigarettes. And in France,
last few years are paying off for
In the quarter, RJR Nabisco sales
of Compagnie Financière Richemont
boards, in print advertisements and
ales were up two-tenths of 1 percent
Kraft," Mr. Goldman said, "includ-
rose nearly 2 percent, to $4.286 billion
A.G. of Switzerland, which cut into
on display signs.
lespite the successful introduction of
ing the way in which they've taken
from $4.203 billion.
RJR Nabisco's cigarette volume.
Net income from RJR Nabisco's
value-oriented new brand by Roth-
traditional, ho-hum brands and made
Steven F. Goldstone, RJR Nabis-
Domestically, RJR Nabisco's
food business increased 13 percent,
nans, a subsidiary of Financière Ri-
them exciting."
co's chairman and chief executive,
Camel and Doral brands were the
to $102 million, in the quarter. The
hemont A.G. of Switzerland.
But at the company's international
said in a statement that the quarter
best performers, up 8 percent and 4.3
Nabisco business showed strength in
Philip Morris's gains in interna-
food division, volume was down 1
"keeps the company on track for a
percent, respectively. But Winston
its biscuit division, which makes
ional results came despite the
percent, Mr. Feldman said, though
solid 1997." He added that the prob-
was down 11.8 percent, and the com-
Oreo and Snackwell's cookies, with a
rengthening of the American dollar
operating profit margins improved
lems for the quarter included "soft-
pany's Salem brand was down 7 per-
22 percent increase in operating in-
gainst European currencies and the
to 10.9 percent in the second quarter
ness in Nabisco International and
cent in volume.
come, and strength in snack catego-
apanese yen, which makes Ameri-
from 10.3 percent a year earlier.
negative foreign currency impact in
Volume in the United States de-
ries such as nuts and confections.
an goods-relatively more expensive.
the overseas tobacco business."
At the company's Miller Beer unit,
clined 4 percent despite sales that
Domestic food sales increased by
During the quarter, which ended
RJR Nabisco shares rose $1.0625
sales, in volume terms, were up 3.1
rose 4 percent, to $1.22 billion, com-
only 1 percent and international
une 30, the company agreed to be
art of the tentative June 21 tobacco
percent, to 12.4 million barrels, "a
yesterday, to $30.875, in trading on
pared with the quarter a year earli-
sales by only 2 percent. International
the New York Stock Exchange.
er.
very. good performance," Mr. Feld-
earnings were reduced by poor re-
ettlement agreement that is now
Overall tobacco volume rose 6 per-
"There was marked weakness in
sults in Brazil and by the costs of
being debated in Congress. The set-
man said.
cent, with the bright spot in the quar-
the domestic tobacco business," said
expansion in Asian markets such as
lement would require cigarette
Among key brands, shipments of
ter being the company's internation-
Martin Feldman, a tobacco analyst
China and Indonesia.
ompanies to pay $368.5 billion over
Miller Lite rose 3.6 percent in vol-
al tobacco volumes, which rose 13
with Smith Barney, and "domestical-
"Over all, the food business was a
he next 25 years to compensate
ume, and Miller High Life shipments
percent, led by cigarette volume in
ly, RJR Nabisco lost market share to
bit of a hodgepodge," Mr. Goldman
l'ates for the costs of treating smok-
were up 10 percent: "The company's
the former Soviet Union, which was
Philip Morris."
said.
ng-related illness and to finance na-
new advertising seems to be work-
up 37 percent, and in Asia, where the
ionwide anti-smoking programs.
ing," Mr. Feldman said.
Salem brand's volume grew 19 per-
cent.
In France, RJR Nabisco's leading
GIVE TO THE FRESH AIR FUND
country in Western Europe, the com-
Struggling Informix Selects Chief Executive
By The New York Times
the company reported a loss of $140.1
INTERNATIONAL
WSJ
7/23/97
to Automate
B.A.T Plans to Buy
Chinese Outnegotiated
Cigarette Business
Continued From First Page
ges Spur Trend
competitors suo
in Asia, according to KDD officials. (AT&T
same concept.
says it doesn't comment on its cable owner-
C&W and N.
transit authority is building a new driver-
Of Mexico's ELM
ship by region.) On most of these big
with SBC late
less subway line that will open next year.
cables, AT&T had great influence over
the negotiations
The Breuninger department store in Stutt-
which companies could subscribe and how
and its U.S. par
gart uses a robot to help sell shoes, and a
the lines were routed.
of favor, partict
Danish dairy uses robots to automatically
By CRAIG TORRES
AT&T rivals say the company mobi-
Richard Brown
stack on pallets precise orders for milk and
Staff Reporter of THE WALL STREET JOURNAL
lized that clout when it first sensed that
understanding
yogurt from dozens of supermarkets.
MEXICO CITY-Britain's B.A.T Indus-
some competitors, Teleglobe and a part-
vember as a m:
And at the Credit Agricole bank branch
tries PLC agreed to acquire the cigarette
nership of Nynex and Cable & Wireless,
ects in China,
on Paris's boulevard Montmartre, there's
subsidiary of Mexico's Empresas La Mo-
had offered to link China directly with
direct fiber-opti
not a single franc in the tellers' cash
derna SA in a two-step transaction valued
North America. AT&T respondéd, people
China and Nort)
drawers. All deposits and withdrawals go
at $1.5 billion plus the assumption of debt.
involved in the negotiations say, by an-
C&W's media-r
through an array of seven specialized
While the purchase price is based on
nouncing it would accommodate China's
Brown had chos
automated teller machines. Forget your
100% of the company, B.A.T initially will
growing traffic by increasing capacity on
an SBC represe
bank card? A teller hands out a temporary
acquire only 50% of the shares of Cigarrera
an existing cable and thereby avoid the
struck the Chin
one on the spot during a recent visit. The
La Moderna, or CLM, plus two voting
need for a new line. As it turned out,
Nynex's pos
system saves employees from the tedious
shares, giving it control of the company.
technical limitations permitted only mini-
a Baby Bell in
job of counting and locking up money and
Within six months, B.A.T can exercise an
mal expansion, and some telecommunica-
little to offer 1
allows them to concentrate on selling stock
option for the remaining stake. If B.A.T
tions executives wondered whether
West Coast as
funds, insurance and credit.
decides not to exercise the option, Em-
AT&T's announcement was a tactical ma-
However, th
presas La Moderna will keep its minority
The bank is expanding the automation
neuver designed to scare away rivals. An
the C&W/Nyne:
stake, and the $1.5 billion will be invested
program because it believes the productiv-
AT&T spokesman denies any such ploy.
leverage over
in CLM, a La Moderna official said.
ity improvements are well worth the mil-
But competitors say the AT&T an-
now say: "This
lion-franc ($165,000)-a-branch expense, but
CLM has 54% of the Mexican cigarette
nouncement did undermine rival propos-
group, an
it is far from clear whether Europe's
market year-to-date, an aggressive pres-
als. It "opened so many potentialities that
"And you can t:
automation boom is having a similar im-
ence in midrange brands, underutilized
it effectively killed our plan," says Steve
Ultimatum Iss
pact on the economy as a whole. At first
capacity and relatively low operating
Bayliss, a Teleglobe official.
costs. Analysts said B.A.T's interest may
Mr. Wang is.
glance, the evidence would seem to sug-
The only people who didn't react to the
be not only in the Mexican market, which
January. He ca
gest that it is. Labor productivity, although
AT&T proposal were the Chinese, who
is growing at 2%. a year, but also in
each competing
behind the U.S. level, grew at an annual
continued to talk to various companies
a low-cost export base.
AT&T and KDD
rate of 2.2% in France, 1.1% in Germany
about ways to install new capacity that
and just 0.8% in the U.S. from 1979-1996,
The sale gives Empresas La Moderna,
pate in the pr
would link China directly to the U.S. "We
according to the Organization for Eco-
or ELM, cash to plow into its other busi-
partners. He an
decided to adopt a wait-and-see attitude,"
nesses. "My main objective is to grow
Communication
nomic Cooperation and Development.
Mr. Wang says.
strongly in the biotechnology area," said
and Nippon Tel
But some economists say that there's
Alfonso Romo Garza, ELM's chairman.
The Guam Landing
Japan's giant
not much evidence that the automation
Mr. Romo also heads Pulsar International
boom is really increasing productivity. The
AT&T also offered to connect China to
which recently
SA, a conglomerate with interests in insur-
with KDD for tr:
McKinsey Global Institute found that de-
the U.S. on an existing cable via a switch-
ance and investment banking.
The Chinese did
spite huge automation advances in some
ing station in Guam, Mr. Li says. That, too,
B.A.T, the world's second-largest ciga-
of AT&T and KI
key parts of retail banking in Europe, U.S.
got a cool response; a Guam landing would
rette maker, said the price includes $1
bidding. All the
banks are still more labor-efficient overall.
have helped AT&T, which has a commit-
billion in cash, a $500 million loan payable
consortium.
Why? Hotly competitive markets in the
ment to Manila to tie in the Philippines to
in three years and assumption of $212
A few days la
U.S. force banks to do the hard work of
U.S.-bound capacity via the tiny U.S. terri-
million in debt. ELM also said that to
slew of other CO.
cutting down on labor costs, while Euro-
tory, but there was little in it for Beijing.
comply with bond agreements, it will pre-
now totaling 14
pean regulations and union agreements
"We didn't give [those plans) much
pay $275 million of its Eurobonds from
China Telecom
frequently limit competition and can pre-
detailed consideration," Mr. Li says. "Af-
other proceeds.
thority, Singap
vent banks from laying off workers.
ter all, there isn't much traffic between
Mr. Romo said the sale was motivated
Ltd., Hongkong
China and Guam." Even KDD, AT&T's
And yet, there's no doubt more and
by concerns about competition in the Mexi-
Chung Hwa Tele
partner, wasn't enthusiastic. "From our
more European firms are turning to auto-
can market rather than by the current
Taiwan, Telekon
viewpoint, Guam wasn't that attractive,"
mation. The increase in demand is being
tobacco-liability situation. Philip Morris
esian Satellite C
a KDD official says. "But AT&T persis-
spurred by growing minimum wages,
Cos. is increasing its stake in ELM's main
An AT&T ne
tently pushed it, and AT&T is our intimate
which have more than doubled in real, or
competitor, Cigarros La Tabacalera Mexi-
signing ceremon
friend." (Ultimately, a Guam connection
inflation-adjusted, terms in France and
cana SA, to 50% from 29% in a deal valued
as "yet another
was included in the plan, but only after all'
Germany over the past 25 years - while
at $400 million.
ing relationship
the consortium's members approved it.)
decreasing in the U.S. During the same
ELM's American depositary shares
But industry
Nor did AT&T endear itself to the
time period, automation has grown more
rose $1.50, or 6.7%, to $24 in New York Stock
thing different.
Chinese with what Mr. Li saw as its
reliable and less costly. A basic ABB robot
Exchange composite trading. The Ameri-
complicated with
aggressive promotion of Submarine Sys-
costs about $45,000 today, down from $90,-
can depositary receipts of B.A.T rose 37.5
Byung Sup, man
tems Inc., a cable-manufacturing unit that
000 in the late 1980s. If automation prices
cents to $18.375 in American Stock Ex-
Telecom. "Like
it recently sold to Tyco International Ltd.,
keep dropping, European business could
change composite trading.
the dominant cal
of Exeter, N.H. At a meeting in Beijing late
ultimately reap real fruit from its invest-
-Ernest Beck in London
now there's more
last year, Mr. Li says, an AT&T-SSI team
ments.
contributed to this article.
are always com]
urged that the unit get the supply contract
else. It's good for
for the network: According to a memo cir-
headache for us.
culated among SBC officials after the
the same way.
WORLD WIRE
meeting, the Chinese saw that maneuver
AT&T fared It
as "a clear attempt to create a configura-
will be represent
tion that would allow AT&T/KDD to domi-
indirectly by Hon.
nate the project management as well as
ate in the former I
LVMH INTENSIFIES MERGER FIGHT
to 2.15 billion kronor from 187 million
operation of the system."
months later, C&V
kronor, but from trucks fell 43% to 688
The Chinese were having none of it,
LVMH Moet Hennessey Luis Vuitton
enough of its con
million kronor.
according to Mr. Li. who describes AT&T's
SA, a French spirits
kong Telecom to
promotion of SSI as "a dispute in the
WSJ Wed. 7/23/97
JULY 23, 1997
44
Premiums
ahead, grabbing even more market share
Net Up at RJR,
from its distant rivals. The company re-
ported a 13% increase in net to $1.84 billion,
From GOP
or 76 cents a share, from $1.62 billion, or 66
Philip Morris,
exclude several food businesses sold in
Eloquence
The World's Leading Speech Recognition Dealer
cents a share, a year earlier. The results
Presents
1996 and the first half of 1997. Sales in-
publicans had proposed
Boosting Stocks
creased 5.2% to $18.41 billion.
The Leading Edge of Computing Productivity:
thre making the Depart-
Analysts say the credit for Philip
nd Human Services the
Morris's results once again goes to Marl-
Continuous Speech Recognition
Recently, however, the
boro, although they add much of the U.S.
budget Office estimated
By SUEIN-L. HWANG
sales increase reflects a change in the
cold cut projected savings
Staff Reporter of THE WALL STREET JOURNAL
timing of a sales promotion. The U.S.
regiven the expense and
NEW YORK - The U.S.'s two largest
cigarette unit saw a 12% increase in
Naturally Speaking TM
an HHS bureaucracy.
cigarette makers reported second-quarter
operating income to $1.19 billion on a 10%
eneficiaries pay $43.80 a
earnings that met Wall Street's expecta-
The best PC dictation program available
High-end technology for the real world
Huge
jump in sales to $3.46 billion. Philip Morris
memiums, deducted auto-
tions. The reports boosted tobacco stocks
vocabulary, speed, accuracy, and flexibility never before available
Essential for medical and
said data from A.C. Nielsen Co. showed its
legal professionals, businesspeople-any computer user
their Social Security
that have been slumping amid investor
market share topped the 50% mark for the
tested premiums were
fear the proposed landmark settlement
first time, reaching 51.1%, up 1.5 percent-
Retail $695 JULY SPECIAL $299
the IRS, richer benefi-
might fall apart or be overhauled.
age points from a year earlier. Marlboro's
lipute their liability and
Philip Morris Cos. posted a 13% earn-
share rose 1.8 points to 35.2%.
part of their annual tax
ings gain, thanks largely to its powerhouse
Now Shipping! Call 1-800-245-2133
brand Marlboro. No. 2 RJR Nabisco Hold-
RJR Nabisco had earnings of $243
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Chise, trying to assuage
ings Corp., had an 11% gain in profit before
million, or 71 cents a share, compared with
special items despite flagging sales of its
$219 million, or 64 cents a share. The
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concerns, would in-
Per-income beneficiaries
Winston and Salem brands. Both compa-
results exclude the impact of a one-time
30-Day Price Guarantee
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State form, also due by
nies posted strong results abroad.
restructuring-ch taken in last year's
Linstead to the Treasury
The recent barrage of legal and regula-
quarter; including the charge, RJR had a
Call Today... Start Talking to Your Computer Tomorr
payment would be made
tory attacks on the $45 billion-a-year indus-
year-ago net loss of $27 million. Sales
Fund."
increased 2% to $4.29 billion.
try has had little impact on its success in
this as a tax increase,"
the marketplace, and the second quarter
Although No. 2-ranked RJR met its
Gramm of Texas. "It's
was pretty much business as usual, inves-
earnings targets as well, the outlook there
this with a straight
tors concluded. Philip Morris ended the
was less rosy. In a conference call, ana-
day at $42.625, up $2.125, while RJR closed
lysts said company officials suggested
at $30.875, up 1.0625, in New York Stock
they lower estimates for the full year,
Audio Book Club
House, spokesman Mike
origed that the adminis-
Exchange composite trading.
which hovered around $3 a share, to a $2.90
counted to "a cosmetic
In recent days, Philip Morris and RJR's
to $2.95 a share. Last year, the company
GET 4 AUDIO BOOKS FOR 99¢
shares had been hurt by concern that the
earned $2.62 a share.
fic problem."
proposed tobacco settlement, which would
Analysts blame RJR's revised esti-
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largely eliminate the industry's liability
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or substantially changed in ways that
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Philip Morris's, it is performing strongly
$70,000. Details haven't
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But the settlement isn't expected to
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the bottom-line contribution was blunted
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RJR would face a 15% drop in U.S. tobacco
pretax operating profit of the business
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that he supports recov-
would see a smaller 10% decline.
the negative impact of currency transla-
1997 Audio Book Club, Inc.
tion operating profits would have jumped
GVA - Proposed settlement may prove unse...g for Philip Morris investors - 07/21/97
http://www.gateway-va.com/pages/news/tobac/1997/0721chip.htm
-wall smeet
News Index
Richmond
Feedback
Times-Dispatch
Gateway Virginia
Monday, July 21, 1997
Proposed settlement may prove unsettling
for Philip Morris investors
Chip Jones
Tobacco
T
he proposed $368.5 billion tobacco settlement may be unsettling for Philip
Morris investors.
A regulatory document filed by the company this month got the attention of
industry analysts already concerned about the impact of the landmark
settlement, which still must be passed by Congress and signed into law by the
president.
In a July 2 filing with the Securities and Exchange Commission, Philip Morris
Cos. Inc., one of Richmond's best-known investments, said it "may evaluate its
share repurchase and dividend policies" in light of the financial obligations of the
proposed settlement.
The deal "would likely materially adversely affect the volume, operating
revenues, cash flows and/or operating income" of the company, the filing said.
The degree of the financial pain would depend, among other things, on the rate
of decline in U.S. cigarette sales and the company's ability to hold on to its
nearly 50 percent share of the domestic cigarette market.
Philip Morris would pay $6.5 billion of the initial sum due in the proposed
agreement, with a total payout of more than $105 billion based on recent share
prices.
As the company figured out how to pay this new debt -- probably through a
combination of cash reserves and loans -- industry analysts and institutional
investors said last week that it's too soon to say whether Philip Morris'
much-vaunted dividend will take a hit.
But if the early reviews are any clue, Philip Morris may slow the rate of its
dividend growth, but not cut the stock sweetener.
John C. Maxwell Jr., senior research analyst at Wheat First Butcher Singer, said
the company might slow the rate of dividend growth, which typically has
outpaced its earnings growth.
1 of 3
07/24/97 10:15:35
GVA - Proposed settlement may prove unse...g for Philip Morris investors - 07/21/97
http://www.gateway-va.com/pages/news/tobac/1997/0721chip.htm
But Maxwell pooh-poohed the notion that the cigarette giant might disappoint
Wall Street with a dividend cut.
Michael S. Beall, a stock analyst at Davenport & Co., said the company had to
warn shareholders about any potential hits to their earnings and dividends.
"But my guess is they aren't planning on cutting" dividends, Beall said.
Even if the dividend doesn't keep pace with past increases, Beall said he doubted
local shareholders would start baling out on the area's largest private employer.
"I think most people who own this stock are in it for good," he said. "I think they
are disturbed somewhat by what's going on
but the people who own it aren't
going to sell it."
Conversely, he said, few people who haven't already gotten into the volatile
cigarette stocks are ready to take the plunge at this late stage.
Last year, Philip Morris' board raised the annual dividend by 20 percent to $4.80
per share. Per-share earnings rose by 18 percent in 1996.
Those numbers gave Philip Morris the distinction of having the highest dividend
yield last year of the 30 blue-chip stocks that make up the Dow Jones industrial
average. The company's 4.2 percent yield was about double the average for a
blue-chip stock.
The yield was calculated by dividing the $4.80 dividend by the price of the stock
at the close of trading on Dec. 31 -- $113. (The company has since had a stock
split that has lowered its price. The annual dividend is now $1.60.)
Philip Morris' board typically makes dividend decisions at its meeting in late
August.
The tobacco settlement is favored by up to 65 percent of Americans who hold
an opinion about it, according to a recent Gallup poll.
Some analysts expect Clinton to make revisions but give his stamp of approval
an the legislation by mid-August.
Bart Naylor, director of corporate affairs at the Teamsters, which holds more
than 3 million shares of Philip Morris stock, said he'd be surprised to see the
company change its dividend before its biggest political issue is settled.
"It would be too bold a statement," he said, "like taking possession of a house
before a family moves out."
Chip Jones covers the tobacco industry. He can be reached at (804) 649-6726
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