8-KOther EventsExhibits & Filings

ALTRIA GROUP, INC. 8-K Report, Corporate Update (Mar 13, 2013)

Filed March 13, 2013For Securities:MO

Summary

This 8-K filing by Altria Group, Inc. (MO) details a significant development concerning Philip Morris USA Inc. (PM USA) and its settlement of Non-Participating Manufacturer (NPM) Adjustments with 17 states, the District of Columbia, and Puerto Rico. PM USA, along with other original signatories to the 1998 Master Settlement Agreement (MSA), entered into a Term Sheet to resolve claims related to the 2003-2012 NPM Adjustments. The key event is the arbitration panel's decision on March 12, 2013, to allow the Term Sheet to proceed via a stipulated partial settlement and award. While this represents a step forward in resolving these long-standing financial obligations, investors should note that a number of "non-signatory states" have not joined the agreement and may pursue legal action to challenge or alter the settlement. The outcome of these potential challenges remains uncertain.

Key Highlights

  • 1Philip Morris USA Inc. (PM USA), a subsidiary of Altria Group, Inc., has entered into a Term Sheet to settle NPM Adjustments with 17 states, D.C., and Puerto Rico.
  • 2The settlement addresses NPM Adjustments for the period of 2003-2012.
  • 3An arbitration panel issued a stipulated partial settlement and award on March 12, 2013, permitting the Term Sheet to move forward.
  • 4This development is a positive step towards resolving past financial obligations related to the Master Settlement Agreement (MSA).
  • 5The company has attached a press release from PM USA dated March 13, 2013, as an exhibit to this filing.
  • 6There is a risk that "non-signatory states" may attempt to legally challenge the settlement's proceedings or seek alternative relief.

Frequently Asked Questions

NPM Adjustments refer to payments that tobacco product manufacturers, who were not original signatories to the 1998 Master Settlement Agreement (MSA), are required to make to states to compensate for reduced MSA payments due to sales of cigarettes by these non-participating manufacturers. PM USA, as a participating manufacturer, has obligations related to these adjustments.

The arbitration panel's decision to issue a stipulated partial settlement and award is significant because it officially permits the Term Sheet between PM USA and the signatory states to proceed. This clears a major hurdle in resolving the NPM Adjustment claims for the specified period.

The primary risk is that states which have not signed the Term Sheet may take legal action in state courts. These actions could aim to prevent the settlement from being implemented as agreed or seek different forms of relief. The company acknowledges that the outcome of such actions is uncertain and may not be favorable to PM USA.

This settlement specifically addresses the NPM Adjustments for the period of 2003-2012 with 17 states, the District of Columbia, and Puerto Rico. It is a partial settlement and award. Further details on the MSA and NPM Adjustments can be found in Note 18 of Altria's 2012 Form 10-K.