8-KOther Events

ALTRIA GROUP, INC. 8-K Report (Jul 9, 2004)

Filed July 9, 2004For Securities:MO

Summary

Altria Group, Inc. (MO), through its wholly-owned subsidiary Philip Morris International Inc. (PMI), has entered into a significant agreement with the European Commission and ten EU Member States resolving disputes related to anti-contraband and anti-counterfeit efforts. This agreement, effective July 9, 2004, aims to enhance cooperation with European law enforcement agencies on these critical issues. For investors, the immediate financial impact is a pre-tax charge of $250 million recorded in the second quarter of 2004 for the initial payment under the agreement. Further payments totaling $150 million in the first year, $100 million in the second, and $75 million annually for the subsequent ten years are outlined, with adjustments based on factors such as PMI's market share in the EU. This agreement signifies Altria's commitment to addressing illicit trade within the European market and introduces potential future financial obligations tied to operational performance.

Key Highlights

  • 1Altria's subsidiary, Philip Morris International (PMI), has finalized an agreement with the European Commission and ten EU Member States.
  • 2The agreement resolves all disputes concerning anti-contraband and anti-counterfeit efforts in the EU.
  • 3PMI will make funds available to support EU anti-contraband and anti-counterfeit initiatives.
  • 4An initial pre-tax charge of $250 million was recorded in Q2 2004 for the first payment.
  • 5Future payments are structured over 12 years, with amounts varying based on market share and other variables.
  • 6PMI will implement approved compliance and tracking protocols for cigarette sales and distribution within the EU and designated countries.
  • 7Altria guarantees that any other subsidiaries selling cigarettes in these regions will also adhere to the agreement's terms.

Frequently Asked Questions

The primary purpose is to resolve all disputes related to anti-contraband and anti-counterfeit efforts and to establish broad cooperation with European law enforcement agencies in these areas.

Altria recorded a pre-tax charge of $250 million in the second quarter of 2004 for the initial payment. There are additional payments planned over 12 years, which will be recognized as an expense in cost of sales when product is shipped, and these future payments are subject to adjustments.

PMI will adhere to compliance and tracking protocols, approved by the European Commission, covering the sale, distribution, storage, and shipment of Philip Morris cigarettes within the European Union and certain designated countries.

Yes, future payments are scheduled, starting with $150 million in the first year after the agreement and $100 million in the second year, followed by $75 million annually for 10 years. These amounts are subject to adjustments based on variables such as PMI's market share in the EU, meaning the total future payout is not fixed.