Philip Morris revises 2nd-quarter net income Reduction reflects settlement of suit brought by Texas

August 15, 1998|By BLOOMBERG NEWS

NEW YORK -- Philip Morris Cos. restated its second-quarter net income yesterday to include a $63 million charge to cover an increase in the tobacco industry's settlement of Texas' lawsuit seeking to recover the costs of treating ill smokers.

The maker of Marlboro cigarettes, Miller beer and Kraft cheese said the charge reduced net income to $1.74 billion, or 71 cents a diluted share. Its profit before charges, gains and discontinued operations remained at $2 billion, or 82 cents a share.

The New York-based company reported earnings July 21.

The tobacco industry agreed in January to settle Texas' lawsuit for $15.3 billion over 25 years. The payments jumped by $2.28 billion to better reflect terms won by Minnesota in its settlement in May.

Texas, like the three other states that have settled Medicaid suits, negotiated a clause that promised it would get the same terms won by states in subsequent agreements.

Under the same clause, the tobacco industry has added $550 million to its $3.6 billion agreement with Mississippi, the first state to settle its lawsuit against the industry. The industry also .. has settled with Florida but hasn't adjusted its payment.

The charge for the Texas payments is $103 million before taxes. Of that, $78 million will go to the state, and $25 million will go to the state's lawyers.

This was the second quarter in a row for which Philip Morris has revised earnings to reflect settlement costs. In the first quarter, it took a charge of $492 million, or 20 cents a share, to pay the first installment of Minnesota's $6.6 billion accord.

Other tobacco companies have done the same. RJR Nabisco Holdings Corp., the No. 2 cigarette maker, revised first-quarter earnings for a charge of $199 million, or 62 cents, for the Minnesota agreement.

The tobacco industry has agreed to pay the four states almost $40 billion in their settlements. The companies have been holding separate talks aimed at settling for about $196.5 billion the remaining 37 lawsuits seeking to recover public costs for the treatment of sick smokers.

Shares of Philip Morris rose 81.25 cents to $42.25. With trading of 12.26 million shares, it was the sixth-most-active stock in U.S. markets.

Pub Date: 8/15/98

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