Altria Group Inc
16 March 2006
Part 5
Note 18.
Financial Instruments:
• Derivative financial instruments: ALG's subsidiaries operate globally, with
manufacturing and sales facilities in various locations around the world. ALG
and its subsidiaries utilize certain financial instruments to manage its foreign
currency and commodity exposures. Derivative financial instruments are used by
ALG and its subsidiaries, principally to reduce exposures to market risks
resulting from fluctuations in foreign exchange rates and commodity prices, by
creating offsetting exposures. Altria Group, Inc. is not a party to leveraged
derivatives and, by policy, does not use derivative financial instruments for
speculative purposes. Financial instruments qualifying for hedge accounting must
maintain a specified level of effectiveness between the hedging instrument and
the item being hedged, both at inception and throughout the hedged period.
Altria Group, Inc. formally documents the nature and relationships between the
hedging instruments and hedged items, as well as its risk-management objectives,
strategies for undertaking the various hedge transactions and method of
assessing hedge effectiveness. Additionally, for hedges of forecasted
transactions, the significant characteristics and expected terms of the
forecasted transaction must be specifically identified, and it must be probable
that each forecasted transaction will occur. If it were deemed probable that the
forecasted transaction will not occur, the gain or loss would be recognized in
earnings currently.
Altria Group, Inc. uses forward foreign exchange contracts and foreign currency
options to mitigate its exposure to changes in exchange rates from third-party
and intercompany actual and forecasted transactions. The primary currencies to
which Altria Group, Inc. is exposed include the Japanese yen, Swiss franc and
the euro. At December 31, 2005 and 2004, Altria Group, Inc. had foreign exchange
option and forward contracts with aggregate notional amounts of $4.8 billion and
$9.7 billion, respectively. The effective portion of unrealized gains and losses
associated with forward contracts and option contracts is deferred as a
component of accumulated other comprehensive earnings (losses) until the
underlying hedged transactions are reported on Altria Group, Inc.'s consolidated
statement of earnings.
In addition, Altria Group, Inc. uses foreign currency swaps to mitigate its
exposure to changes in exchange rates related to foreign currency denominated
debt. These swaps typically convert fixed-rate foreign currency denominated debt
to fixed-rate debt denominated in the functional currency of the borrowing
entity. A substantial portion of the foreign currency swap agreements is
accounted for as cash flow hedges. The unrealized gain (loss) relating to
foreign currency swap agreements that do not qualify for hedge accounting
treatment under U.S. GAAP was insignificant as of December 31, 2005 and 2004. At
December 31, 2005 and 2004, the notional amounts of foreign currency swap
agreements aggregated $2.3 billion and $2.7 billion, respectively. Aggregate
maturities of foreign currency swap agreements at December 31, 2005, were $1.0
billion in 2006 and $1.3 billion in 2008.
Altria Group, Inc. also designates certain foreign currency denominated debt as
net investment hedges of foreign operations. During the year ended December 31,
2005, these hedges of net investments resulted in a gain, net of income taxes,
of $369 million, and in the years ended December 31, 2004 and 2003, resulted in
losses, net of income taxes, of $344 million and $286 million, respectively.
These gains and losses were reported as a component of accumulated other
comprehensive earnings (losses) within currency translation adjustments.
Kraft is exposed to price risk related to forecasted purchases of certain
commodities used as raw materials. Accordingly, Kraft uses commodity forward
contracts as cash flow hedges, primarily for coffee and cocoa. Commodity futures
and options are also used to hedge the price of certain commodities, including
milk, coffee, cocoa, wheat, corn, sugar and soybean oil. At December 31, 2005
and 2004, Kraft had net long commodity positions of $521 million and $443
million, respectively. In general, commodity forward contracts qualify for the
normal purchase exception under U.S. GAAP. The effective portion of unrealized
gains and losses on commodity futures and option contracts is deferred as a
component of accumulated other comprehensive earnings (losses) and is recognized
as a component of cost of sales when the related inventory is sold. Unrealized
gains or losses on net commodity positions were immaterial at December 31, 2005
and 2004.
During the years ended December 31, 2005, 2004 and 2003, ineffectiveness related
to fair value hedges and cash flow hedges was not material. Altria Group, Inc.
is hedging forecasted transactions for periods not exceeding the next fifteen
months. At December 31, 2005, Altria Group, Inc. estimates that an insignificant
amount of derivative gains, net of income taxes, reported in accumulated other
comprehensive earnings (losses) will be reclassified to the consolidated
statement of earnings within the next twelve months.
Derivative gains or losses reported in accumulated other comprehensive earnings
(losses) are a result of qualifying hedging activity. Transfers of gains or
losses from accumulated other comprehensive earnings (losses) to earnings are
offset by the corresponding gains or losses on the underlying hedged item.
Hedging activity affected accumulated other comprehensive earnings (losses), net
of income taxes, during the years ended December 31, 2005, 2004 and 2003, as
follows:
(in millions) 2005 2004 2003
Loss as of January 1........... $ (14 ) $ (83 ) $ (77 )
Derivative (gains) losses (95 ) 86 (42 )
transferred to earnings......
Change in fair value........... 133 (17 ) 36
Gain (loss) as of $24 $ (14 ) $ (83 )
December 31.............
• Credit exposure and credit risk: Altria Group, Inc. is exposed to credit loss
in the event of nonperformance by counterparties. Altria Group, Inc. does not
anticipate nonperformance within its consumer products businesses. However, see
Note 8. Finance Assets, net regarding certain aircraft and other leases.
• Fair value: The aggregate fair value, based on market quotes, of Altria
Group, Inc.'s total debt at December 31, 2005, was $24.6 billion, as compared
with its carrying value of $23.9 billion. The aggregate fair value of Altria
Group, Inc.'s total debt at December 31, 2004, was $24.2 billion, as compared
with its carrying value of $23.0 billion.
The fair value, based on market quotes, of Altria Group, Inc.'s equity
investment in SABMiller at December 31, 2005, was $7.8 billion, as compared with
its carrying value of $3.4 billion. The fair value of Altria Group, Inc.'s
equity investment in SABMiller at December 31, 2004, was $7.1 billion, as
compared with its carrying value of $2.5 billion.
See Notes 9 and 10 for additional disclosures of fair value for short-term
borrowings and long-term debt.
Note 19.
Contingencies:
Legal proceedings covering a wide range of matters are pending or threatened in
various United States and foreign jurisdictions against ALG, its subsidiaries
and affiliates, including PM USA and PMI, as well as their respective
indemnitees. Various types of claims are raised in these proceedings, including
product liability, consumer protection, antitrust, tax, contraband shipments,
patent infringement, employment matters, claims for contribution and claims of
competitors and distributors.
Overview of Tobacco-Related Litigation
• Types and Number of Cases: Pending claims related to tobacco products
generally fall within the following categories: (i) smoking and health cases
alleging personal injury brought on behalf of individual plaintiffs, (ii)
smoking and health cases primarily alleging personal injury and purporting to be
brought on behalf of a class of individual plaintiffs, including cases in which
the aggregated claims of a number of individual plaintiffs are to be tried in a
single proceeding, (iii) health care cost recovery cases brought by governmental
(both domestic and foreign) and non-governmental plaintiffs seeking
reimbursement for health care expenditures allegedly caused by cigarette smoking
and/or disgorgement of profits, (iv) class action suits alleging that the uses
of the terms 'Lights' and 'Ultra Lights' constitute deceptive and unfair trade
practices, common law fraud, or violations of the Racketeer Influenced and
Corrupt Organizations Act ('RICO'), and (v) other tobacco-related litigation.
Other tobacco-related litigation includes suits by foreign governments seeking
to recover damages resulting from the allegedly illegal importation of
cigarettes into various jurisdictions, suits by former asbestos manufacturers
seeking contribution or reimbursement for amounts expended in connection with
the defense and payment of asbestos claims that were allegedly caused in whole
or in part by cigarette smoking, and various antitrust suits. Damages claimed in
some of the tobacco-related litigation range into the billions of dollars.
Plaintiffs' theories of recovery and the defenses raised in the smoking and
health, health care cost recovery and Lights/Ultra Lights cases are discussed
below.
The table below lists the number of certain tobacco-related cases pending in the
United States against PM USA and, in some instances, ALG or PMI, as of December
31, 2005, December 31, 2004 and December 31, 2003, and a page reference to
further discussions of each type of case.
Type of Case Number of Cases Number of Cases Number of Cases Page
Pending as of Pending as of Pending as of
December 31, December 31, December 31, References
2005 2004 2003
Individual Smoking 228 222 423 71
and.............
Health Cases
(1)................
Smoking and Health 9 9 12 71
Class.............
Actions and
Aggregated..........
Claims Litigation
(2)..............
Health Care Cost 4 10 13 72-74
Recovery............
Actions...............
Lights/Ultra Lights 24 21 21 74
Class..........
Actions...............
Tobacco Price 2 2 28 75
Cases.............
Cigarette Contraband 0 2 5 75-76
Cases..........
Asbestos Contribution 1 1 7 76
Cases............
(1) Does not include 2,640 cases brought by flight attendants seeking
compensatory damages for personal injuries allegedly caused by exposure to
environmental tobacco smoke ('ETS'). The flight attendants allege that they are
members of an ETS smoking and health class action, which was settled in 1997.
The terms of the court-approved settlement in that case allow class members to
file individual lawsuits seeking compensatory damages, but prohibit them from
seeking punitive damages. Also, does not include nine individual smoking and
health cases brought against certain retailers that are indemnitees of PM USA.
(2) Includes as one case the aggregated claims of 928 individuals that are
proposed to be tried in a single proceeding in West Virginia. In December 2005,
the West Virginia Supreme Court of Appeals ruled that the United States
Constitution does not preclude a trial in two phases in this case. Issues
related to defendants' conduct, entitlement to punitive damages and a punitive
damages multiplier, if any, would be determined in the first phase. The second
phase would consist of individual trials to determine liability, if any, and
compensatory damages.
There are also a number of other tobacco-related actions pending outside the
United States against PMI and its affiliates and subsidiaries, including an
estimated 132 individual smoking and health cases (Argentina (59), Australia
(2), Brazil (54), Chile (3), Colombia (1), Israel (2), Italy (4), the
Philippines (1), Poland (1), Scotland (1), Spain (2), Turkey (1) and Venezuela
(1)), compared with approximately 121 such cases on December 31, 2004, and
approximately 99 such cases on December 31, 2003. In addition, in Italy, 23
cases are pending in the Italian equivalent of small claims court where damages
are limited to €2,000 per case, and four cases are pending in Finland and one in
Israel against defendants that are indemnitees of a subsidiary of PMI.
In addition, as of December 31, 2005, there were three smoking and health
putative class actions pending outside the United States against PMI in Brazil
(1), Israel (1), and Poland (1) compared with three such cases on December 31,
2004, and six such cases on December 31, 2003. Four health care cost recovery
actions are pending in Israel (1), Canada (1), France (1) and Spain (1) against
PMI or its affiliates, and two Lights/Ultra Lights class actions are pending in
Israel.
• Pending and Upcoming Trials: Trial in one individual smoking and health case
in which PM USA is a defendant began in a Missouri state court in January 2006.
An estimated nine additional smoking and health cases against PM USA are
scheduled for trial in 2006. Cases against other tobacco companies are also
scheduled for trial through the end of 2006. Trial dates are subject to change.
• Recent Trial Results: Since January 1999, verdicts have been returned in 43
smoking and health, Lights/Ultra Lights and health care cost recovery cases in
which PM USA was a defendant. Verdicts in favor of PM USA and other defendants
were returned in 27 of the 43 cases. These 27 cases were tried in California
(4), Florida (9), Mississippi (1), Missouri (1), New Hampshire (1), New Jersey
(1), New York (3), Ohio (2), Pennsylvania (1), Rhode Island (1), Tennessee (2),
and West Virginia (1). Plaintiffs' appeals or post-trial motions challenging the
verdicts are pending in California, Florida, Missouri, and Pennsylvania. A
motion for a new trial has been granted in one of the cases in Florida. In
addition, in December 2002, a court dismissed an individual smoking and health
case in California at the end of trial. Also, in July 2005, a jury in Tennessee
returned a verdict in favor of PM USA in a case in which plaintiffs had
challenged PM USA's retail promotional and merchandising programs under the
Robinson-Patman Act.
Of the 16 cases in which verdicts were returned in favor of plaintiffs, four
have reached final resolution. A $17.8 million verdict against defendants in a
health care cost recovery case (including $6.8 million against PM USA) was
reversed, and all claims were dismissed with prejudice in February 2005 (Blue
Cross/Blue Shield). In October 2004, after exhausting all appeals, PM USA paid
$3.3 million (including interest of $285,000) in an individual smoking and
health case in Florida (Eastman). In March 2005, after exhausting all appeals,
PM USA paid $17 million (including interest of $6.4 million) in an individual
smoking and health case in California (Henley). In December 2005, after
exhausting all appeals, PM USA paid $328,759 (including interest of $78,259) as
its share of the judgment amount and interest in a flight attendant ETS case in
Florida (French) and will pay attorneys' fees yet to be determined.
The chart below lists the verdict and post-trial developments in the remaining
12 pending cases that have gone to trial since January 1999 in which verdicts
were returned in favor of plaintiffs.
Date Location of Type of Case Verdict Post-Trial Developments
Court/Name
of
Plaintiff
March 2005 New York/ Individual $3.42 million in In December 2005, PM USA's post-trial motions
Smoking compensatory damages challenging the verdict were denied by the trial
Rose against two defendants, court. PM USA has appealed.
and Health including PM USA, and
$17.1 million in
punitive damages against
PM USA.
October 2004 Florida/ Individual $240,000 against PM USA. PM USA's appeal is pending.
Smoking and
Arnitz Health
May 2004 Louisiana/ Smoking and Approximately $590 In June 2004, the state trial court entered
Health Class million, against all judgment in the amount of the verdict of $590
Scott Action defendants including PM million, plus prejudgment interest accruing from
USA, jointly and the date the suit commenced. As of December 31,
severally, to fund a 2005, the amount of prejudgment interest was
10-year smoking approximately $390 million. PM USA's share of the
cessation program. verdict and prejudgment interest has not been
allocated. Defendants, including PM USA, have
appealed. See 'Scott Class Action' below.
November Missouri/ Individual $2.1 million in PM USA's appeal is pending.
2003 Smoking and compensatory damages
Thompson Health against all defendants,
including $837,403
against PM USA.
March 2003 Illinois/ Lights/Ultra $7.1005 billion in In December 2005, the Illinois Supreme Court
Lights compensatory damages and reversed the trial court's judgment in favor of the
Price Class Action $3 billion in punitive plaintiffs and remanded the case to the trial court
damages against PM USA. with instructions to dismiss the case against PM
USA. See the discussion of the Price case under the
heading 'Lights/Ultra Lights Cases.'
October 2002 California/ Individual $850,000 in compensatory In December 2002, the trial court reduced the
Smoking and damages and $28 billion punitive damages award to $28 million; PM USA and
Bullock Health in punitive damages plaintiff have appealed.
against PM USA.
June 2002 Florida/ Individual $37.5 million in In March 2003, the trial court reduced the damages
Smoking and compensatory damages award to $24.86 million. PM USA's share of the
Lukacs Health against all defendants, damages award is approximately $6 million. The
including PM USA. court has not yet entered the judgment on the jury
verdict. If a judgment is entered in this case, PM
USA intends to appeal.
March 2002 Oregon/ Individual $168,500 in compensatory In May 2002, the trial court reduced the punitive
Smoking and damages and $150 million damages award to $100 million; PM USA and plaintiff
Schwarz Health in punitive damages have appealed.
against PM USA.
Date Location of Type of Case Verdict Post-Trial Developments
Court/Name
of
Plaintiff
June 2001 California/ Individual $5.5 million in In August 2001, the trial court reduced the punitive
Smoking compensatory damages damages award to $100 million. In September 2004, the
Boeken and $3 billion in California Second District Court of Appeal reduced the
and Health punitive damages punitive damages award to $50 million but otherwise
against PM USA. affirmed the judgment entered in the case. Plaintiff
and PM USA each sought rehearing. In April 2005, the
Court of Appeal reaffirmed the award amount set in its
September 2004 ruling. In August 2005, the California
Supreme Court refused to hear the petitions of PM USA
and plaintiff for further review. Following the
California Supreme Court's refusal to hear the
parties' appeal, PM USA recorded a provision in the
2005 statement of earnings of approximately $80
million (including interest) in connection with this
case. Plaintiff and PM USA have petitioned the United
States Supreme Court for further review.
July 2000 Florida/ Smoking $145 billion in In May 2003, the Florida Third District Court of
punitive damages Appeal reversed the judgment entered by the state
Engle and Health against all defendants, trial court and instructed the trial court to order
Class Action including $74 billion the decertification of the class. Plaintiffs' motion
against PM USA. for reconsideration was denied in September 2003, and
plaintiffs petitioned the Florida Supreme Court for
further review. In May 2004, the Florida Supreme Court
agreed to review the case, and the Supreme Court heard
oral arguments in November 2004. See 'Engle Class
Action' below.
March 2000 California/ Individual $1.72 million in In April 2004, the California First District Court of
Smoking and compensatory damages Appeal entered judgment in favor of defendants on
Whiteley Health against PM USA and plaintiff's negligent design claims, and reversed and
another defendant, and remanded for a new trial on plaintiff's fraud-related
$10 million in punitive claims. Defendants' motion to transfer venue is
damages against each of pending.
PM USA and the other
defendant.
March 1999 Oregon/ Individual $800,000 in The trial court reduced the punitive damages award to
Smoking and compensatory damages, $32 million, and PM USA and plaintiff appealed. In
Williams Health $21,500 in medical June 2002, the Oregon Court of Appeals reinstated the
expenses and $79.5 $79.5 million punitive damages award. Following the
million in punitive Oregon Supreme Court's refusal to hear PM USA's
damages against PM USA. appeal, PM USA recorded a provision of $32 million in
connection with this case and petitioned the United
States Supreme Court for further review. In October
2003, the United States Supreme Court set aside the
Oregon appellate court's ruling, and directed the
Oregon court to reconsider the case in light of the
2003 State Farm decision by the United States Supreme
Court, which limited punitive damages. In June 2004,
the Oregon Court of Appeals reinstated the $79.5
million punitive damages award. On February 2, 2006,
the Oregon Supreme Court affirmed the Court of
Appeals' decision. PM USA intends to petition the
United States Supreme Court for further review and
pursue other avenues of relief.
In addition to the cases discussed above, in October 2003, a three-judge panel
of an appellate court in Brazil reversed a lower court's dismissal of an
individual smoking and health case and ordered PMI's Brazilian affiliate to pay
plaintiff approximately $256,000 and other unspecified damages. PMI's Brazilian
affiliate appealed. In December 2004, the three-judge panel's decision was
vacated by an en banc panel of the appellate court, which upheld the trial
court's dismissal of the case. Also, in April 2005, a labor court trial judge
entered judgment against PMI's Venezuelan affiliate in favor of a former
employee plaintiff in the amount of approximately $150,000 in connection with an
individual claim involving smoking and health issues. PMI's Venezuelan affiliate
appealed. In August 2005, the appellate court reversed the lower court's
decision. Plaintiff has appealed to the Supreme Court.
With respect to certain adverse verdicts currently on appeal, excluding amounts
relating to the Engle and Price cases, as of December 31, 2005, PM USA has
posted various forms of security totaling approximately $329 million, the
majority of which have been collateralized with cash deposits, to obtain stays
of judgments pending appeals. The cash deposits are included in other assets on
the consolidated balance sheets.
• Engle Class Action: In July 2000, in the second phase of the Engle smoking
and health class action in Florida, a jury returned a verdict assessing punitive
damages totaling approximately $145 billion against various defendants,
including $74 billion against PM USA. Following entry of judgment, PM USA posted
a bond in the amount of $100 million and appealed.
In May 2001, the trial court approved a stipulation providing that execution of
the punitive damages component of the Engle judgment will remain stayed against
PM USA and the other participating defendants through the completion of all
judicial review. As a result of the stipulation, PM USA placed $500 million into
a separate interest-bearing escrow account that, regardless of the outcome of
the appeal, will be paid to the court and the court will determine how to
allocate or distribute it consistent with Florida Rules of Civil Procedure. In
July 2001, PM USA also placed $1.2 billion into an interest-bearing escrow
account, which will be returned to PM USA should it prevail in its appeal of the
case. (The $1.2 billion escrow account is included in the December 31, 2005 and
2004 consolidated balance sheets as other assets. Interest income on the $1.2
billion escrow account is paid to PM USA quarterly and is being recorded as
earned, in interest and other debt expense, net, in the consolidated statements
of earnings.) In connection with the stipulation, PM USA recorded a $500 million
pre-tax charge in its consolidated statement of earnings for the quarter ended
March 31, 2001. In May 2003, the Florida Third District Court of Appeal reversed
the judgment entered by the trial court and instructed the trial court to order
the decertification of the class. Plaintiffs petitioned the Florida Supreme
Court for further review and, in May 2004, the Florida Supreme Court agreed to
review the case. Oral arguments were heard in November 2004.
• Scott Class Action: In July 2003, following the first phase of the trial in
the Scott class action, in which plaintiffs sought creation of a fund to pay for
medical monitoring and smoking cessation programs, a Louisiana jury returned a
verdict in favor of defendants, including PM USA, in connection with plaintiffs'
medical monitoring claims, but also found that plaintiffs could benefit from
smoking cessation assistance. The jury also found that cigarettes as designed
are not defective but that the defendants failed to disclose all they knew about
smoking and diseases and marketed their products to minors. In May 2004, in the
second phase of the trial, the jury awarded plaintiffs approximately $590
million, against all defendants jointly and severally, to fund a 10-year smoking
cessation program. In June 2004, the court entered judgment, which awarded
plaintiffs the approximately $590 million jury award plus prejudgment interest
accruing from the date the suit commenced. As of December 31, 2005, the amount
of prejudgment interest was approximately $390 million. PM USA's share of the
jury award and prejudgment interest has not been allocated. Defendants,
including PM USA, have appealed. Pursuant to a stipulation of the parties, the
trial court entered an order setting the amount of the bond at $50 million for
all defendants in accordance with an article of the Louisiana Code of Civil
Procedure, and a Louisiana statute (the 'bond cap law') fixing the amount of
security in civil cases involving a signatory to the MSA (as defined below).
Under the terms of the stipulation, plaintiffs reserve the right to contest, at
a later date, the sufficiency or amount of the bond on any grounds including the
applicability or constitutionality of the bond cap law. In September 2004,
defendants collectively posted a bond in the amount of $50 million.
Smoking and Health Litigation
• Overview: Plaintiffs' allegations of liability in smoking and health cases
are based on various theories of recovery, including negligence, gross
negligence, strict liability, fraud, misrepresentation, design defect, failure
to warn, breach of express and implied warranties, breach of special duty,
conspiracy, concert of action, violations of deceptive trade practice laws and
consumer protection statutes, and claims under the federal and state
anti-racketeering statutes. In certain of these cases, plaintiffs claim that
cigarette smoking exacerbated the injuries caused by their exposure to asbestos.
Plaintiffs in the smoking and health actions seek various forms of relief,
including compensatory and punitive damages, treble/multiple damages and other
statutory damages and penalties, creation of medical monitoring and smoking
cessation funds, disgorgement of profits, and injunctive and equitable relief.
Defenses raised in these cases include lack of proximate cause, assumption of
the risk, comparative fault and/or contributory negligence, statutes of
limitations and preemption by the Federal Cigarette Labeling and Advertising
Act.
• Smoking and Health Class Actions: Since the dismissal in May 1996 of a
purported nationwide class action brought on behalf of allegedly addicted
smokers, plaintiffs have filed numerous putative smoking and health class action
suits in various state and federal courts. In general, these cases purport to be
brought on behalf of residents of a particular state or states (although a few
cases purport to be nationwide in scope) and raise addiction claims and, in many
cases, claims of physical injury as well.
Class certification has been denied or reversed by courts in 56 smoking and
health class actions involving PM USA in Arkansas (1), the District of Columbia
(2), Florida (1), Illinois (2), Iowa (1), Kansas (1), Louisiana (1), Maryland
(1), Michigan (1), Minnesota (1), Nevada (29), New Jersey (6), New York (2),
Ohio (1), Oklahoma (1), Pennsylvania (1), Puerto Rico (1), South Carolina (1),
Texas (1) and Wisconsin (1). A class remains certified in the Scott class action
discussed above.
A purported smoking and health class action is pending in Brazil. In that case,
the trial court has issued an order finding that the action was valid under the
Brazilian Consumer Defense Code.
The order contemplates a second stage of the case in which individuals are to
file their claims. The trial court awarded the equivalent of approximately $350
per smoker per year of smoking for moral damages and has indicated that material
damages will be assessed in a second phase of the case. Defendants have
appealed. The trial court has granted defendants' motion to stay its decision
while the appeal is pending.
Health Care Cost Recovery Litigation
• Overview: In health care cost recovery litigation, domestic and foreign
governmental entities and non-governmental plaintiffs seek reimbursement of
health care cost expenditures allegedly caused by tobacco products and, in some
cases, of future expenditures and damages as well. Relief sought by some but not
all plaintiffs includes punitive damages, multiple damages and other statutory
damages and penalties, injunctions prohibiting alleged marketing and sales to
minors, disclosure of research, disgorgement of profits, funding of anti-smoking
programs, additional disclosure of nicotine yields, and payment of attorney and
expert witness fees.
The claims asserted include the claim that cigarette manufacturers were '
unjustly enriched' by plaintiffs' payment of health care costs allegedly
attributable to smoking, as well as claims of indemnity, negligence, strict
liability, breach of express and implied warranty, violation of a voluntary
undertaking or special duty, fraud, negligent misrepresentation, conspiracy,
public nuisance, claims under federal and state statutes governing consumer
fraud, antitrust, deceptive trade practices and false advertising, and claims
under federal and state anti-racketeering statutes.
Defenses raised include lack of proximate cause, remoteness of injury, failure
to state a valid claim, lack of benefit, adequate remedy at law, 'unclean hands'
(namely, that plaintiffs cannot obtain equitable relief because they
participated in, and benefited from, the sale of cigarettes), lack of antitrust
standing and injury, federal preemption, lack of statutory authority to bring
suit, and statutes of limitations. In addition, defendants argue that they
should be entitled to 'set off' any alleged damages to the extent the plaintiffs
benefit economically from the sale of cigarettes through the receipt of excise
taxes or otherwise. Defendants also argue that these cases are improper because
plaintiffs must proceed under principles of subrogation and assignment. Under
traditional theories of recovery, a payor of medical costs (such as an insurer)
can seek recovery of health care costs from a third party solely by 'standing in
the shoes' of the injured party. Defendants argue that plaintiffs should be
required to bring any actions as subrogees of individual health care recipients
and should be subject to all defenses available against the injured party.
Although there have been some decisions to the contrary, most judicial decisions
have dismissed all or most health care cost recovery claims against cigarette
manufacturers. Nine federal circuit courts of appeals and six state appellate
courts, relying primarily on grounds that plaintiffs' claims were too remote,
have ordered or affirmed dismissals of health care cost recovery actions. The
United States Supreme Court has refused to consider plaintiffs' appeals from the
cases decided by five circuit courts of appeals.
A number of foreign governmental entities have filed health care cost recovery
actions in the United States. Such suits have been brought in the United States
by 13 countries, a Canadian province, 11 Brazilian states and 11 Brazilian
cities. Of these 36 cases, 34 have been dismissed, and the two cases brought by
the Republic of Panama and the Brazilian State of Sao Paulo remain pending. In
addition to the cases brought in the United States, health care cost recovery
actions have also been brought in Israel (1), the Marshall Islands (1)
(dismissed), Canada (1), France (1; dismissed, but on appeal) and Spain (1;
dismissed, but on appeal), and other entities have stated that they are
considering filing such actions. In September 2005, in the case in Canada, the
Canadian Supreme Court ruled that legislation permitting the lawsuit is
constitutional, and, as a result, the case which had previously been dismissed
by the trial court will now proceed.
In March 1999, in the first health care cost recovery case to go to trial, an
Ohio jury returned a verdict in favor of defendants on all counts. In addition,
a $17.8 million verdict against defendants (including $6.8 million against PM
USA) was reversed in a health care cost recovery case in New York, and all
claims were dismissed with prejudice in February 2005 (Blue Cross/Blue Shield).
The health care cost recovery case brought by the City of St. Louis, Missouri
and approximately 50 Missouri hospitals, in which PM USA and ALG are defendants,
remains pending without a trial date.
• Settlements of Health Care Cost Recovery Litigation: In November 1998, PM USA
and certain other United States tobacco product manufacturers entered into the
Master Settlement Agreement (the 'MSA') with 46 states, the District of
Columbia, Puerto Rico, Guam, the United States Virgin Islands, American Samoa
and the Northern Marianas to settle asserted and unasserted health care cost
recovery and other claims. PM USA and certain other United States tobacco
product manufacturers had previously settled similar claims brought by
Mississippi, Florida, Texas and Minnesota (together with the MSA, the 'State
Settlement Agreements'). The State Settlement Agreements require that the
domestic tobacco industry make substantial annual payments in the following
amounts (excluding future annual payments under the agreement with the tobacco
grower states discussed below), subject to adjustments for several factors,
including inflation, market share and industry volume: 2006 through 2007, $8.4
billion each year; and thereafter, $9.4 billion each year. In addition, the
domestic tobacco industry is required to pay settling plaintiffs' attorneys'
fees, subject to an annual cap of $500 million. Pursuant to the provisions of
the MSA, domestic tobacco product manufacturers, including PM USA, who are
original signatories to the MSA ('OPMs') are participating in a proceeding that
may result in a downward adjustment to the amounts paid by the OPMs to the
states and territories that are parties to the MSA for the year 2003. The
availability and the precise amount of that adjustment depend on a number of
factors and will likely not be determined until some time in 2006 or later. If
the adjustment does become available, it may be applied as a credit against
future payments due from the OPMs.
The State Settlement Agreements also include provisions relating to
advertising and marketing restrictions, public disclosure of certain industry
documents, limitations on challenges to certain tobacco control and underage use
laws, restrictions on lobbying activities and other provisions.
As part of the MSA, the settling defendants committed to work cooperatively with
the tobacco-growing states to address concerns about the potential adverse
economic impact of the MSA on tobacco growers and quota holders. To that end, in
1999, four of the major domestic tobacco product manufacturers, including PM
USA, and the grower states, established the National Tobacco Grower Settlement
Trust ('NTGST'), a trust fund to provide aid to tobacco growers and quota
holders. The trust was to be funded by these four manufacturers over 12 years
with payments, prior to application of various adjustments, scheduled to total
$5.15 billion. Remaining industry payments (2006 through 2008, $500 million each
year; 2009 and 2010, $295 million each year) were to be subject to adjustment
for several factors, including inflation, United States cigarette volume and
certain contingent events, and, in general, were to be allocated based on each
manufacturer's relative market share. Provisions of the NTGST allow for offsets
to the extent that payments are made to growers and quota holders as part of a
legislated end to the federal tobacco quota and price support program.
In October 2004, the Fair and Equitable Tobacco Reform Act of 2004 ('FETRA') was
signed into law. FETRA provides for the elimination of the federal tobacco quota
and price support program through an industry-funded buy-out of tobacco growers
and quota holders. The cost of the buy-out is estimated at approximately $9.6
billion and will be paid over 10 years by manufacturers and importers of all
tobacco products. The cost will be allocated based on the relative market shares
of manufacturers and importers of all tobacco products. The quota buy-out
payments will offset already scheduled payments to the NTGST. Manufacturers and
importers of tobacco products are also obligated to cover any losses (up to $500
million) that the government may incur on the disposition of tobacco pool stock
accumulated under the previous tobacco price support program. In September 2005,
PM USA was billed $138 million for its share of tobacco pool stock losses and
recorded the amount as an expense. Altria Group, Inc. does not currently
anticipate that the quota buy-out will have a material adverse impact on its
consolidated results in 2006 and beyond.
Following the enactment of FETRA, the trustee of the NTGST and the state
entities conveying NTGST payments to tobacco growers and quota holders sued
tobacco product manufacturers alleging that the offset provisions did not apply
to payments due in 2004. In December 2004, a North Carolina trial court ruled
that FETRA's enactment had triggered the offset provisions and that the tobacco
product manufacturers, including PM USA, were entitled to receive a refund of
amounts paid to the NTGST during the first three quarters of 2004 and were not
required to make the payments that would otherwise have been due during the
fourth quarter of 2004. Plaintiffs appealed, and in August 2005, the North
Carolina Supreme Court reversed the trial court's ruling and remanded the case
to the lower court for additional proceedings. In October 2005, the trial court
ordered that the trustee could distribute the amounts that the tobacco companies
had already paid to the NTGST during the first three quarters of 2004. PM USA's
portion of these payments was approximately $174 million. The trial court also
ruled that the manufacturers must make the payment originally scheduled to be
made to the NTGST in December 2004, with interest. PM USA's portion of the
principal was approximately $58 million, which PM USA paid in October 2005. In
November 2005, PM USA paid $2 million in interest on the December 2004 payment.
The State Settlement Agreements have materially adversely affected the volumes
of PM USA, and ALG believes that they may also materially adversely affect the
results of operations, cash flows or financial position of PM USA and Altria
Group, Inc. in future periods. The degree of the adverse impact will depend on,
among other things, the rate of decline in United States cigarette sales in the
premium and discount segments, PM USA's share of the domestic premium and
discount cigarette segments, and the effect of any resulting cost advantage of
manufacturers not subject to the MSA and the other State Settlement Agreements.
In April 2004, a lawsuit was filed in state court in Los Angeles, California, on
behalf of all California residents who purchased cigarettes in California from
April 2000 to the present, alleging that the MSA enabled the defendants,
including PM USA and ALG, to engage in unlawful price fixing and market sharing
agreements. The complaint sought damages and also sought to enjoin defendants
from continuing to operate under those provisions of the MSA that allegedly
violate California law. In June 2004, plaintiffs dismissed this case and refiled
a substantially similar complaint in federal court in San Francisco, California.
The new complaint is brought on behalf of the same purported class but differs
in that it covers purchases from June 2000 to the present, names the Attorney
General of California as a defendant, and does not name ALG as a defendant. In
March 2005, the trial court granted defendants' motion to dismiss the case.
Plaintiffs have appealed.
There is a suit pending against New York state officials, in which importers of
cigarettes allege that the MSA and certain New York statutes enacted in
connection with the MSA violate federal antitrust law. Neither ALG nor PM USA is
a defendant in this case. In September 2004, the court denied plaintiffs' motion
to preliminarily enjoin the MSA and certain related New York statutes, but the
court issued a preliminary injunction against an amendment repealing the '
allocable share' provision of the New York Escrow Statute. In addition, similar
lawsuits have been brought in other states, including Kentucky, Arkansas,
Kansas, Louisiana, Nebraska, Tennessee and Oklahoma, and a similar proceeding
has been brought under the provisions of the North American Free Trade Agreement
in the United Nations. Neither ALG nor PM USA is a defendant in these cases.
• Federal Government's Lawsuit: In 1999, the United States government filed a
lawsuit in the United States District Court for the District of Columbia against
various cigarette manufacturers, including PM USA, and others, including ALG,
asserting claims under three federal statutes, the Medical Care Recovery Act ('
MCRA'), the Medicare Secondary Payer ('MSP') provisions of the Social Security
Act and the civil provisions of RICO. Trial of the case ended in June 2005, and
post-trial briefings were completed in September 2005. The lawsuit seeks to
recover an unspecified amount of health care costs for tobacco-related illnesses
allegedly caused by defendants' fraudulent and tortious conduct and paid for by
the government under various federal health care programs, including Medicare,
military and veterans' health benefits programs, and the Federal Employees
Health Benefits Program. The complaint alleges that such costs total more than
$20 billion annually. It also seeks what it alleges to be equitable and
declaratory relief, including disgorgement of profits which arose from
defendants' allegedly tortious conduct, an injunction prohibiting certain
actions by the defendants, and a declaration that the defendants are liable for
the federal government's future costs of providing health care resulting from
defendants' alleged past tortious and wrongful conduct. In September 2000, the
trial court dismissed the government's MCRA and MSP claims, but permitted
discovery to proceed on the government's claims for relief under the civil
provisions of RICO.
The government alleged that disgorgement by defendants of approximately $280
billion is an appropriate remedy. In May 2004, the trial court issued an order
denying defendants' motion for partial summary judgment limiting the
disgorgement remedy. In February 2005, a panel of the United States Court of
Appeals for the District of Columbia Circuit held that disgorgement is not a
remedy available to the government under the civil provisions of RICO and
entered summary judgment in favor of defendants, with respect to the
disgorgement claim. In April 2005, the Court of Appeals denied the government's
motion for rehearing. In July 2005, the government petitioned the United States
Supreme Court for further review of the Court of Appeals' ruling that
disgorgement is not an available remedy, and in October 2005, the Supreme Court
denied the petition.
In June 2005, the government filed with the trial court its proposed final
judgment seeking remedies of approximately $14 billion, including $10 billion
over a five-year period to fund a national smoking cessation program and $4
billion over a ten-year period to fund a public education and counter-marketing
campaign. Further, the government's proposed remedy would require defendants to
pay additional monies to these programs if targeted reductions in the smoking
rate of those under 21 are not achieved according to a prescribed timetable. In
July 2005, the court granted the motion of six organizations to intervene in the
case for the limited purpose of being heard on the issue of permissible and
appropriate remedies. Those organizations argued that because the government's
proposed final judgment sought remedies more limited than what had been sought
earlier in the case, the government no longer adequately represents the
interests of those organizations. In September 2005, the trial court granted six
motions filed by various organizations for leave to file amicus curiae briefs.
Two additional motions remain pending, including a motion for leave to file an
amicus curiae brief advocating that as part of any relief granted in the case,
the court direct more than $14 billion over the next ten years to various
purposes specified in their brief.
Lights/Ultra Lights Cases
• Overview: Plaintiffs in these class actions (some of which have not been
certified as such), allege, among other things, that the uses of the terms '
Lights' and/or 'Ultra Lights' constitute deceptive and unfair trade practices,
common law fraud, or RICO violations, and seek injunctive and equitable relief,
including restitution and, in certain cases, punitive damages. These class
actions have been brought against PM USA and, in certain instances, ALG and PMI
or its subsidiaries, on behalf of individuals who purchased and consumed various
brands of cigarettes, including Marlboro Lights, Marlboro Ultra Lights, Virginia
Slims Lights and Superslims, Merit Lights and Cambridge Lights. Defenses raised
in these cases include lack of misrepresentation, lack of causation, injury, and
damages, the statute of limitations, express preemption by the Federal Cigarette
Labeling and Advertising Act and implied preemption by the policies and
directives of the Federal Trade Commission, non-liability under state statutory
provisions exempting conduct that complies with federal regulatory directives,
and the First Amendment. Twenty-four cases are pending in Arkansas (2), Delaware
(1), Florida (1), Georgia (1), Illinois (2), Kansas (1), Louisiana (1), Maine
(1), Massachusetts (1), Minnesota (1), Missouri (1), New Hampshire (1), New
Mexico (1), New Jersey (1), New York (1), Ohio (2), Oregon (1), Tennessee (1),
Washington (1), and West Virginia (2). In addition, there are two cases pending
in Israel. Other entities have stated that they are considering filing such
actions against ALG, PMI, and PM USA.
To date, trial courts in Arizona and Oregon have refused to certify a class, an
appellate court in Florida has overturned class certification by a trial court
and the Supreme Court of Illinois has overturned a judgment in favor of a
plaintiff class in the Price case, which is discussed below. Plaintiffs in the
Florida case have petitioned the Florida Supreme Court for further review, and
the Supreme Court has stayed further proceedings pending its decision in the
Engle case discussed above.
Trial courts have certified classes against PM USA in Massachusetts (Aspinall),
Ohio (Marrone and Philipps), Minnesota (Curtis) and Missouri (Craft). PM USA has
appealed or otherwise challenged these class certification orders. In August
2004, the Massachusetts Judicial Supreme Court affirmed the class certification
order in the Aspinall case. In September 2004, an appellate court affirmed the
class certification orders in the Marrone and Philipps cases in Ohio, and PM USA
sought review by the Ohio Supreme Court. In February 2005, the Ohio Supreme
Court accepted the cases for review to determine whether a prior determination
has been made by the State of Ohio that the conduct at issue is deceptive such
that plaintiffs may pursue claims. In April 2005, the Minnesota Supreme Court
denied PM USA's petition for interlocutory review of the trial court's class
certification order in the Curtis case; however, the trial court has stayed the
Curtis case pending the outcome of the appeal of the dismissal of an unrelated
Lights case. In September 2005, PM USA removed Curtis to federal court based on
the Eighth Circuit's decision in Watson, which upheld the removal of a Lights
case to federal court based on the federal officer jurisdiction of the Federal
Trade Commission. Plaintiffs' motion to remand the case to the state court is
pending. In August 2005, a Missouri Court of Appeals affirmed the class
certification order in the Craft case. In September 2005, PM USA removed Craft
to federal court based on the Eighth Circuit's decision in Watson. Plaintiffs'
motion to remand the case to the state court is pending.
In addition to these cases, plaintiffs' motion for certification of a nationwide
class is pending in a case in the United States District Court for the Eastern
District of New York (Schwab). In September 2005, the trial court hearing the
Schwab case granted in part defendants' motion for partial summary judgment
dismissing plaintiffs' claims for equitable relief, and denied a number of
plaintiffs' motions for summary judgment. In November, the trial court hearing
the Schwab case ruled that the plaintiffs would be permitted to calculate
damages on an aggregate basis and use 'fluid recovery' theories to allocate them
among class members. Also, in December 2005, in the Miner case pending in the
United States District Court for the Western District of Arkansas, plaintiffs
moved for certification of a class composed of individuals who purchased
Marlboro Lights or Cambridge Lights brands in Arkansas, California, Colorado,
and Michigan. In December, defendants filed a motion to stay plaintiffs' motion
for class certification until the court rules on PM USA's pending motion to
transfer venue to the United States District Court for the Eastern District of
Arkansas. This motion to transfer was granted in January 2006. In addition,
plaintiffs' motions for class certification are pending in the cases in New
Jersey and Georgia.
• The Price Case: Trial in the Price case commenced in state court in Illinois
in January 2003, and in March 2003, the judge found in favor of the plaintiff
class and awarded approximately $7.1 billion in compensatory damages and $3
billion in punitive damages against PM USA. In April 2003, the judge reduced the
amount of the appeal bond that PM USA must provide and ordered PM USA to place a
pre-existing 7.0%, $6 billion long-term note from ALG to PM USA in an escrow
account with an Illinois financial institution. (Since this note is the result
of an intercompany financing arrangement, it does not appear on the consolidated
balance sheets of Altria Group, Inc.) The judge's order also required PM USA to
make cash deposits with the clerk of the Madison County Circuit Court in the
following amounts: beginning October 1, 2003, an amount equal to the interest
earned by PM USA on the ALG note ($210 million every six months), an additional
$800 million in four equal quarterly installments between September 2003 and
June 2004 and the payments of principal of the note, which are due in April
2008, 2009 and 2010. Through December 31, 2005, PM USA paid $1.85 billion of the
cash payments due under the judge's order. (Cash payments into the account are
included in other assets on Altria Group, Inc.'s consolidated balance sheets at
December 31, 2005 and 2004.) Plaintiffs appealed the judge's order reducing the
bond. In July 2003, the Illinois Fifth District Court of Appeals ruled that the
trial court had exceeded its authority in reducing the bond. In September 2003,
the Illinois Supreme Court upheld the reduced bond set by the trial court and
announced it would hear PM USA's appeal on the merits without the need for
intermediate appellate court review. In December 2005, the Illinois Supreme
Court reversed the trial court's judgment in favor of the plaintiffs and
remanded the case to the trial court with instructions that the case be
dismissed. In January 2006, plaintiffs filed a motion seeking a rehearing from
the Illinois Supreme Court. If PM USA prevails on appeal, the escrowed note and
all cash deposited with the court will be returned to PM USA, with accrued
interest less administrative fees payable to the court.
Certain Other Tobacco-Related Litigation
• Tobacco Price Cases: As of December 31, 2005, two cases were pending in
Kansas and New Mexico in which plaintiffs allege that defendants, including PM
USA, conspired to fix cigarette prices in violation of antitrust laws. ALG and
PMI are defendants in the case in Kansas. Plaintiffs' motions for class
certification have been granted in both cases. In February 2005, the New Mexico
Court of Appeals affirmed the class certification decision. PM USA's motion for
summary judgment is pending in the New Mexico case.
• Wholesale Leaders Cases: In June 2003, certain wholesale distributors of
cigarettes filed suit in Tennessee against PM USA seeking to enjoin the PM USA '
2003 Wholesale Leaders' ('WL') program that became available to wholesalers in
June 2003. The complaint alleges that the WL program constitutes unlawful price
discrimination and is an attempt to monopolize. In addition to an injunction,
plaintiffs seek unspecified monetary damages, attorneys' fees, costs and
interest. The states of Tennessee and Mississippi intervened as plaintiffs in
this litigation. In August 2003, the trial court issued a preliminary
injunction, subject to plaintiffs' posting a bond in the amount of $1 million,
enjoining PM USA from implementing certain discount terms with respect to the
sixteen wholesale distributor plaintiffs, and PM USA appealed. In September
2003, the United States Court of Appeals for the Sixth Circuit granted PM USA's
motion to stay the injunction pending PM USA's expedited appeal. In January
2004, Tennessee filed a motion to dismiss its complaint, and its complaint was
dismissed without prejudice in March 2004. In August 2005, the trial court
granted PM USA's motion for summary judgment, dismissed the case, and dissolved
the preliminary injunction. Plaintiffs have appealed. In December 2003, a
tobacco manufacturer filed a similar lawsuit against PM USA in Michigan seeking
unspecified monetary damages in which it alleges that the WL program constitutes
unlawful price discrimination and is an attempt to monopolize. Plaintiff
voluntarily dismissed its claims alleging price discrimination, and in July
2004, the court granted defendants' motion to dismiss the attempt-to-monopolize
claim. Plaintiff appealed, but dismissed its appeal in September 2005.
• Consolidated Putative Punitive Damages Cases: In September 2000, a putative
class action (Simon, et al. v. Philip Morris Incorporated, et al. (Simon II))
was filed in the federal district court in the Eastern District of New York that
purported to consolidate punitive damages claims in ten tobacco-related actions
then pending in federal district courts in New York and Pennsylvania. In
September 2002, the court granted plaintiffs' motion seeking certification of a
punitive damages class of persons residing in the United States who smoke or
smoked defendants' cigarettes, and who have been diagnosed by a physician with
an enumerated disease from April 1993 through the date notice of the
certification of this class is disseminated. The following persons are excluded
from the class: (1) those who have obtained judgments or settlements against any
defendants; (2) those against whom any defendant has obtained judgment; (3)
persons who are part of the Engle class; (4) persons who should have reasonably
realized that they had an enumerated disease prior to April 9, 1993; and (5)
those whose diagnosis or reasonable basis for knowledge predates their use of
tobacco. Defendants petitioned the United States Court of Appeals for the Second
Circuit for review of the trial court's ruling. In May 2005, the Second Circuit
vacated the trial court's class certification order and remanded the case to the
trial court for further proceedings. Plaintiffs' motion for reconsideration was
denied, and the time for plaintiffs to petition the United States Supreme Court
for further review has expired.
• Cases Under the California Business and Professions Code: In June 1997 and
July 1998, two suits (Brown and Daniels), were filed in California state court
alleging that domestic cigarette manufacturers, including PM USA and others,
have violated California Business and Professions Code Sections 17200 and 17500
regarding unfair, unlawful and fraudulent business practices. Class
certification was granted in both cases as to plaintiffs' claims that class
members are entitled to reimbursement of the costs of cigarettes purchased
during the class periods and injunctive relief. In September 2002, the court
granted defendants' motion for summary judgment as to all claims in one of the
cases, and plaintiffs appealed. In October 2004, the California Fourth District
Court of Appeal affirmed the trial court's ruling, and also denied plaintiffs'
motion for rehearing. In February 2005, the California Supreme Court agreed to
hear plaintiffs' appeal. In September 2004, the trial court in the other case
granted defendants' motion for summary judgment as to plaintiffs' claims
attacking defendants' cigarette advertising and promotion and denied defendants'
motion for summary judgment on plaintiffs' claims based on allegedly false
affirmative statements. Plaintiffs' motion for rehearing was denied. In March
2005, the court granted defendants' motion to decertify the class based on a
recent change in California law. Plaintiffs' motion for reconsideration of the
order that decertified the class was denied, and plaintiffs have appealed.
In May 2004, a lawsuit (Gurevitch) was filed in California state court on behalf
of a purported class of all California residents who purchased the Merit brand
of cigarettes since July 2000 to the present alleging that defendants, including
PM USA, violated California's Business and Professions Code Sections 17200 and
17500 regarding unfair, unlawful and fraudulent business practices, including
false and misleading advertising. The complaint also alleges violations of
California's Consumer Legal Remedies Act. Plaintiffs seek injunctive relief,
disgorgement, restitution, and attorneys' fees. In July 2005, defendants' motion
to dismiss was granted; however, plaintiffs' motion for leave to amend the
complaint was also granted, and plaintiffs filed an amended complaint in
September 2005. In October 2005, the court stayed this action pending the
California Supreme Court's rulings on two cases not involving PM USA, the
resolution of which may impact the adjudication of this case.
• Cigarette Contraband Cases: In May 2000 and August 2001, various departments
of Colombia and the European Community and 10 Member States, filed suits in the
United States against ALG and certain of its subsidiaries, including PM USA and
PMI, and other cigarette manufacturers and their affiliates, alleging that
defendants sold to distributors cigarettes that would be illegally imported into
various jurisdictions. The claims asserted in these cases include negligence,
negligent misrepresentation, fraud, unjust enrichment, violations of RICO and
its state-law equivalents and conspiracy. Plaintiffs in these cases seek actual
damages, treble damages and unspecified injunctive relief. In February 2002, the
federal district court granted defendants' motions to dismiss the actions.
Plaintiffs in each case appealed. In January 2004, the United States Court of
Appeals for the Second Circuit affirmed the dismissals of the cases based on the
common law Revenue Rule, which bars a foreign government from bringing civil
claims in U.S. courts for the recovery of lost taxes. In April 2004, plaintiffs
petitioned the United States Supreme Court for further review. In July 2004, the
European Community and the 10 Member States entered into a cooperation agreement
with PMI, the terms of which provide for broad cooperation between PMI and
European law enforcement agencies on anti-contraband and anti-counterfeit
efforts and resolve all disputes between the parties on these issues. Pursuant
to this agreement, the European Community and the 10 Member States withdrew
their suit as it relates to the ALG, PM USA and PMI defendants.
In May 2005, the United States Supreme Court, in a summary order, granted the
plaintiffs' petitions for review, vacated the judgment of the Court of Appeals
for the Second Circuit and remanded the cases to that court for further review
in light of the Supreme Court's April 2005 decision in U.S. v. Pasquantino. In
Pasquantino, a criminal case brought by the United States government, the
Supreme Court upheld the convictions of the defendants in that case for
violating the U.S. wire fraud statute based on a scheme to smuggle alcohol into
Canada without paying Canadian taxes, while expressing no opinion as to the
question of whether the Revenue Rule barred a foreign government from bringing a
civil action in U.S. courts for a scheme to defraud it of taxes, as the Second
Circuit had earlier held in distinguishing those civil claims from a U.S.
criminal prosecution as in Pasquantino. In September 2005, the Second Circuit
reinstated its original decision affirming the dismissal of the cases based on
the common law Revenue Rule, concluding that the Pasquantino decision cast no
doubt on the reasoning and result of the original January 2004 decision. The
Second Circuit acknowledged that the claims of the European Community and 10
Member States against ALG, PM USA, and PMI had previously been dismissed. In
October 2005, the plaintiffs in the two cases petitioned the United States
Supreme Court for further review. In January 2006, the Supreme Court denied
plaintiffs' petition for review. It is possible that future litigation related
to cigarette contraband issues may be brought.
• Vending Machine Case: In February 1999, plaintiffs filed a lawsuit in the
United States District Court in Tennessee as a purported nationwide class of
cigarette vending machine operators, and alleged that PM USA violated the
Robinson-Patman Act in connection with its promotional and merchandising
programs available to retail stores and not available to cigarette vending
machine operators. The initial complaint was amended to bring the total number
of plaintiffs to 211 but, by stipulated orders, all claims were stayed, except
those of ten plaintiffs that proceeded to pre-trial discovery. Plaintiffs
requested actual damages, treble damages, injunctive relief, attorneys' fees and
costs, and other unspecified relief. In August 2001, the trial court granted PM
USA's motion for summary judgment and dismissed, with prejudice, the claims of
the ten plaintiffs. In October 2001, the court certified its decision for appeal
to the United States Court of Appeals for the Sixth Circuit following the
stipulation of all plaintiffs that the district court's dismissal would, if
affirmed, be binding on all plaintiffs. In January 2004, the Sixth Circuit
reversed the lower court's grant of summary judgment with respect to plaintiffs'
claim that PM USA violated Robinson-Patman Act provisions regarding promotional
services and with respect to the discriminatory pricing claim of plaintiffs who
bought cigarettes directly from PM USA. The claims of eight plaintiffs were
tried in July 2005 (one plaintiff was granted a continuance and another
voluntarily dismissed its claims with prejudice). The jury returned a verdict in
favor of PM USA on the Robinson-Patman Act claims and awarded PM USA
approximately $110,000 on counterclaims PM USA made against three plaintiffs.
Following completion of the trial, the district court lifted the stay on the
remaining claims and directed the magistrate judge to establish a schedule for
the disposition of those claims. In October 2005, on agreement of the parties,
all claims in this matter were dismissed with prejudice.
• Asbestos Contribution Cases: These cases, which have been brought on behalf
of former asbestos manufacturers and affiliated entities against PM USA and
other cigarette manufacturers, seek, among other things, contribution or
reimbursement for amounts expended in connection with the defense and payment of
asbestos claims that were allegedly caused in whole or in part by cigarette
smoking. Currently, one case is pending in California.
Certain Other Actions
• Italian Tax Matters: In recent years, approximately two hundred tax
assessments alleging nonpayment of taxes in Italy were served upon certain
affiliates of PMI. All of these assessments were resolved in 2003 and the second
quarter of 2004, with the exception of certain assessments which were
duplicative of other assessments. In July 2005, the tax obligations underlying
the duplicative assessments were declared fully satisfied, thereby rendering
unnecessary any further litigation with respect to such assessments.
• Italian Antitrust Case: During 2001, the competition authority in Italy
initiated an investigation into the pricing activities of participants in that
cigarette market. In March 2003, the authority issued its findings and imposed
fines totaling 50 million euro on certain affiliates of PMI. PMI's affiliates
appealed to the administrative court, which rejected the appeal in July 2003.
PMI believes that its affiliates have numerous grounds for appeal, and in
February 2004, its affiliates appealed to the supreme administrative court. The
appeal was heard on November 8, 2005. However, under Italian law, if fines are
not paid within certain specified time periods, interest and eventually
penalties will be applied to the fines. Accordingly, in December 2003, pending
final resolution of the case, PMI's affiliates paid 51 million euro representing
the fines and any applicable interest to the date of payment. The 51 million
euro will be returned to PMI's affiliates if they prevail on appeal.
Accordingly, the payment has been included in other assets on Altria Group,
Inc.'s consolidated balance sheets.
• PMCC Federal Income Tax Matter: The IRS is examining the consolidated tax
returns for Altria Group, Inc., which includes PMCC, for years 1996 through
1999. Recently, the IRS has proposed to disallow certain transactions, and may
in the future challenge and disallow several more, of PMCC's leveraged leases
based on recent Revenue Rulings and a recent IRS Notice addressing specific
types of leveraged leases (lease-in/lease-out transactions, qualified
technological equipment transactions, and sale-in/lease-out transactions).
Altria Group, Inc. is expecting an assessment regarding these transactions for
the years 1996 to 1999. PMCC believes that the position and supporting case law
described in the Revenue Rulings and the IRS Notice, as well as those asserted
in the proposed adjustments, are incorrectly applied to PMCC's transactions and
that its leveraged leases are factually and legally distinguishable in material
respects from the IRS's position. PMCC and ALG intend to vigorously defend
against any challenges based on that position through administrative appeals and
litigation, if necessary, and ALG believes that, given the strength of PMCC's
position, it should ultimately prevail. However, litigation is subject to many
uncertainties and an adverse outcome could have a material adverse effect on
Altria Group, Inc.'s consolidated results of operations, cash flows or financial
position.
It is not possible to predict the outcome of the litigation pending against ALG
and its subsidiaries. Litigation is subject to many uncertainties. As discussed
above under 'Recent Trial Results,' unfavorable verdicts awarding substantial
damages against PM USA have been returned in 16 cases since 1999. Of the 16
cases in which verdicts were returned in favor of plaintiffs, four have reached
final resolution. A verdict against defendants in a health care cost recovery
case has been reversed and all claims were dismissed with prejudice, and after
exhausting all appeals, PM USA paid $3.3 million (including interest of
$285,000) in an individual smoking and health case in Florida, $17 million
(including interest of $6.4 million) in an individual smoking and health case in
California and $328,759 (including interest of $78,259) in a flight attendant
ETS case in Florida. The remaining 12 cases are in various post-trial stages. It
is possible that there could be further adverse developments in these cases and
that additional cases could be decided unfavorably. In the event of an adverse
trial result in certain pending litigation, the defendant may not be able to
obtain a required bond or obtain relief from bonding requirements in order to
prevent a plaintiff from seeking to collect a judgment while an adverse verdict
is being appealed. An unfavorable outcome or settlement of pending
tobacco-related litigation could encourage the commencement of additional
litigation. There have also been a number of adverse legislative, regulatory,
political and other developments concerning cigarette smoking and the tobacco
industry that have received widespread media attention. These developments may
negatively affect the perception of judges and jurors with respect to the
tobacco industry, possibly to the detriment of certain pending litigation, and
may prompt the commencement of additional similar litigation.
ALG and its subsidiaries record provisions in the consolidated financial
statements for pending litigation when they determine that an unfavorable
outcome is probable and the amount of the loss can be reasonably estimated.
Except as discussed elsewhere in this Note 19. Contingencies: (i) management has
not concluded that it is probable that a loss has been incurred in any of the
pending tobacco-related litigation; (ii) management is unable to make a
meaningful estimate of the amount or range of loss that could result from an
unfavorable outcome of pending tobacco-related litigation; and (iii)
accordingly, management has not provided any amounts in the consolidated
financial statements for unfavorable outcomes, if any.
The present legislative and litigation environment is substantially uncertain,
and it is possible that the business and volume of ALG's subsidiaries, as well
as Altria Group, Inc.'s consolidated results of operations, cash flows or
financial position could be materially affected by an unfavorable outcome or
settlement of certain pending litigation or by the enactment of federal or state
tobacco legislation. ALG and each of its subsidiaries named as a defendant
believe, and each has been so advised by counsel handling the respective cases,
that it has a number of valid defenses to the litigation pending against it, as
well as valid bases for appeal of adverse verdicts against it. All such cases
are, and will continue to be, vigorously defended. However, ALG and its
subsidiaries may enter into settlement discussions in particular cases if they
believe it is in the best interests of ALG's stockholders to do so.
Third-Party Guarantees
At December 31, 2005, Altria Group, Inc.'s third-party guarantees, which are
primarily related to excise taxes, and acquisition and divestiture activities,
approximated $328 million, of which $296 million have no specified expiration
dates. The remainder expire through 2023, with $17 million expiring during 2006.
Altria Group, Inc. is required to perform under these guarantees in the event
that a third party fails to make contractual payments or achieve performance
measures. Altria Group, Inc. has a liability of $41 million on its consolidated
balance sheet at December 31, 2005, relating to these guarantees. In the
ordinary course of business, certain subsidiaries of ALG have agreed to
indemnify a limited number of third parties in the event of future litigation.
Note 20.
Quarterly Financial Data (Unaudited):
2005 Quarters
(in millions, except per 1st 2nd 3rd 4th
share data)
Net $ 23,618 $ 24,784 $ 24,962 $ 24,490
revenues...................
Gross profit................ $7,791 $8,191 $8,224 $7,950
Earnings from continuing $2,584 $2,912 $2,883 $2,289
operations............
Earnings (loss) from 12 (245 )
discontinued
operations.......
Net $2,596 $2,667 $2,883 $2,289
earnings....................
Per share data:
Basic EPS:..................
Continuing $ 1.25 $ 1.41 $ 1.39 $ 1.10
operations...........
Discontinued 0.01 (0.12 )
operations............
Net earnings............. $ 1.26 $ 1.29 $ 1.39 $ 1.10
Diluted EPS:...............
Continuing $ 1.24 $ 1.40 $ 1.38 $ 1.09
operations...........
Discontinued 0.01 (0.12 )
operations............
Net earnings............. $ 1.25 $ 1.28 $ 1.38 $ 1.09
Dividends $ 0.73 $ 0.73 $ 0.80 $ 0.80
declared............
Market $68.50 $69.68 $74.04 $78.68
price -high...............
-low $60.40 $62.70 $63.60 $68.60
2004 Quarters
(in millions, except per 1st 2nd 3rd 4th
share data)
Net $21,721 $22,894 $22,615 $22,380
revenues...................
Gross profit................ $ 7,392 $ 7,761 $ 7,517 $ 7,334
Earnings from continuing $ 2,185 $ 2,608 $ 2,637 $ 1,990
operations............
Earnings (loss) from 9 19 11 (43 )
discontinued
operations.......
Net $ 2,194 $ 2,627 $ 2,648 $ 1,947
earnings....................
Per share
data:................
Basic EPS:..................
Continuing $1.07 $1.27 $1.29 $0.97
operations...........
Discontinued 0.01 (0.02 )
operations............
Net earnings............. $1.07 $1.28 $1.29 $0.95
Diluted EPS:
Continuing $1.06 $1.26 $1.28 $0.96
operations...........
Discontinued 0.01 0.01 0.01 (0.02 )
operations............
Net earnings............. $1.07 $1.27 $1.29 $0.94
Dividends $0.68 $0.68 $0.73 $0.73
declared............
Market price
- high.............. $ 58.96 $ 57.20 $ 50.30 $ 61.88
- low $ 52.49 $ 44.75 $ 44.50 $ 45.88
Basic and diluted EPS are computed independently for each of the periods
presented. Accordingly, the sum of the quarterly EPS amounts may not agree to
the total for the year.
During 2005 and 2004, Altria Group, Inc. recorded the following pre-tax charges
or (gains) in earnings from continuing operations:
2005 Quarters
(in millions) 1st 2nd 3rd 4th
Domestic tobacco headquarters relocation $1 $ 2 $ - $ 1
charges..........
Domestic tobacco loss on U.S. tobacco 138
pool............
Domestic tobacco quota (115 )
buy-out.................
Provision for airline industry 200
exposure.............
(Gains) losses on sales of (116 ) 1 7
businesses..............
Asset impairment and exit 171 70 61 316
costs..............
$ 56 $ 73 $284 $ 324
2004 Quarters
(in millions) 1st 2nd 3rd 4th
Domestic tobacco headquarters relocation $ 10 $ 10 $ 5 $6
charges..........
International tobacco E.C. 250
agreement...............
Provision for airline industry 140
exposure.............
Losses (gains) on sales of 8 (5 )
businesses.............
Asset impairment and exit 308 160 62 188
costs..............
$ 318 $420 $ 75 $329
As discussed in Note 14. Income Taxes, Altria Group, Inc. and Kraft have each
recognized income tax benefits in the consolidated statements of earnings during
2005 and 2004 as a result of various tax events, including the benefits earned
under the provisions of the American Jobs Creation Act.
Note 21.
Subsequent Event:
In January 2006, Kraft announced plans to continue its restructuring efforts
beyond those originally contemplated (see Note 3. Asset Impairment and Exit
Costs). Additional pre-tax charges are anticipated to be $2.5 billion from 2006
to 2009, of which approximately $1.6 billion are expected to require cash
payments. These charges will result in the anticipated closure of up to 20
additional facilities and the elimination of approximately 8,000 additional
positions. Initiatives under the expanded program include additional
organizational streamlining and facility closures. The entire restructuring
program is expected to ultimately result in $3.7 billion in pre-tax charges, the
closure of up to 40 facilities and the elimination of approximately 14,000
positions. Approximately $2.3 billion of the $3.7 billion in pre-tax charges are
expected to require cash payments.
The principal stock exchange, on which Altria Group, Inc.'s common stock (par
value $0.33 1/3 per share) is listed, is the New York Stock Exchange. At January
31, 2006, there were approximately 106,300 holders of record of Altria Group,
Inc.'s common stock.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Altria Group, Inc.:
We have completed integrated audits of Altria Group, Inc.'s 2005 and 2004
consolidated financial statements and of its internal control over financial
reporting as of December 31, 2005, and an audit of its 2003 consolidated
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions on Altria Group, Inc.'s
2005, 2004, and 2003 consolidated financial statements and on its internal
control over financial reporting as of December 31, 2005, based on our audits,
are presented below.
Consolidated financial statements
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, stockholders' equity, and cash flows,
present fairly, in all material respects, the financial position of Altria
Group, Inc. and its subsidiaries at December 31, 2005 and 2004, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of Altria Group, Inc.'s management. Our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit of
financial statements includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Internal control over financial reporting
Also, in our opinion, management's assessment, included in the Report of
Management on Internal Control Over Financial Reporting dated February 7, 2006,
that Altria Group, Inc. maintained effective internal control over financial
reporting as of December 31, 2005 based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ('COSO'), is fairly stated, in all
material respects, based on those criteria. Furthermore, in our opinion, Altria
Group, Inc. maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2005, based on criteria established
in Internal Control - Integrated Framework issued by the COSO. Altria Group,
Inc.'s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express opinions on
management's assessment and on the effectiveness of Altria Group, Inc.'s
internal control over financial reporting based on our audit. We conducted our
audit of internal control over financial reporting in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was
maintained in all material respects. An audit of internal control over financial
reporting includes obtaining an understanding of internal control over financial
reporting, evaluating management's assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
New York, New York
February 7, 2006
Report of Management on Internal Control Over Financial Reporting
Management of Altria Group, Inc. is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Securities Exchange Act of 1934. Altria Group, Inc.'s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America.
Internal control over financial reporting includes those written policies and
procedures that:
• pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
Altria Group, Inc.;
• provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America;
• provide reasonable assurance that receipts and expenditures of Altria
Group, Inc. are being made only in accordance with authorization of management
and directors of Altria Group, Inc.; and
• provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of assets that could have a
material effect on the consolidated financial statements.
Internal control over financial reporting includes the controls themselves,
monitoring and internal auditing practices and actions taken to correct
deficiencies as identified.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management assessed the effectiveness of Altria Group, Inc.'s internal control
over financial reporting as of December 31, 2005. Management based this
assessment on criteria for effective internal control over financial reporting
described in 'Internal Control - Integrated Framework' issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Management's assessment
included an evaluation of the design of Altria Group, Inc.'s internal control
over financial reporting and testing of the operational effectiveness of its
internal control over financial reporting. Management reviewed the results of
its assessment with the Audit Committee of our Board of Directors.
Based on this assessment, management determined that, as of December 31, 2005,
Altria Group, Inc. maintained effective internal control over financial
reporting.
PricewaterhouseCoopers LLP, independent registered public accounting firm, who
audited and reported on the consolidated financial statements of Altria Group,
Inc. included in this report, has audited our management's assessment of the
effectiveness of Altria Group, Inc.'s internal control over financial reporting
as of December 31, 2005 and issued an attestation report on management's
assessment of internal control over financial reporting.
February 7, 2006
Exhibit 21
ALTRIA GROUP, INC. SUBSIDIARIES
Certain active subsidiaries of the Company and their subsidiaries as of December
31, 2005, are listed below. The names of certain subsidiaries, which considered
in the aggregate would not constitute a significant subsidiary, have been
omitted.
Name State or
Country of
Organization
152999 Canada Inc. Canada
3072440 Nova Scotia Company Canada
AB Kraft Foods Lietuva Lithuania
Abal Hermanos S.A. Uruguay
Aberdare Developments Ltd. British Virgin
Islands
Aberdare Two Developments Ltd. British Virgin
Islands
AGF Pack, Inc. Japan
AGF SP, Inc. Japan
Agrotab Empreendimentos Agro-Industriais, S.A. Portugal
Airco IHC, Inc. Delaware
Ajinomoto General Foods, Inc. Japan
Alimentos Especiales, Sociedad Anonima Guatemala
Altria Corporate Services International, Inc. Delaware
Altria Corporate Services, Inc. New York
Altria Finance (Cayman Islands) Ltd. Cayman Islands
Altria Finance (Europe) AG Switzerland
Altria Insurance (Ireland) Limited Ireland
Altria ITSC Europe, sarl Switzerland
Altria Reinsurance (Ireland) Limited Ireland
Arizona Promosyon Servisleri Limited Sirketi Turkey
Balance Bar Company Delaware
Batavia Trading Corporation British Virgin
Islands
Beijing Nabisco Food Company Ltd. China
Boca Foods Company Delaware
C.A. Tabacalera Nacional Venezuela
Cafe Grand 'Mere S.A.S. France
Callard & Bowser-Suchard, Inc. Delaware
Capri Sun, Inc. Delaware
Carlton Lebensmittelvertriebs GmbH Germany
Carnes y Conservas Espanolas, S.A. Spain
Charles Stewart & Company (Kirkcaldy) Limited United Kingdom
Churny Company, Inc. Delaware
CJSC Philip Morris Ukraine Ukraine
Closed Joint Stock Company Kraft Foods Ukraine Ukraine
Compania Colombiana de Tabaco S.A. Colombia
Compania Venezolana de Conservas C.A. Venezuela
Confibel S.A. Belgium
Consiber, S.A. Spain
Corporativo Kraft, S. de R.L. de C.V. Mexico
Cote d'Or Italia S.r.l. Italy
Dart Resorts Inc. Delaware
Dumas B.V. Netherlands
Duvanska Industrija Nis (DIN) Serbia
El Gallito Industrial, S.A. Costa Rica
Exhibit 21
Estrella A/S Denmark
Fabrica de Cigarrillos El Progreso S.A. Ecuador
Family Nutrition Company S.A.E. Egypt
Fattorie Osella S.p.A. Italy
Finalrealm Ltd. United Kingdom
Franklin Baker Company of the Philippines Philippines
Freezer Queen Foods (Canada) Limited Canada
FTR Holding S.A. Switzerland
Fulmer Corporation Limited Bahamas
Gallatas United Biscuits, S.A. Spain
Gelatinas Ecuatoriana S.A. Ecuador
General Foods Credit Corporation Delaware
General Foods Credit Investors No. 1 Corporation Delaware
General Foods Credit Investors No. 2 Corporation Delaware
General Foods Credit Investors No. 3 Corporation Delaware
General Foods Foreign Sales Corporation U.S. Virgin
Islands
Godfrey Phillips (Malaysia) Sdn. Bhd. Malaysia
Grant Holdings, Inc. Pennsylvania
Grant Transit Co. Delaware
GWP C.V. Netherlands
HAG-Coffex SNC France
Hervin Holdings, Inc. Delaware
HNB Investment Corp. Delaware
IKM BVBA Belgium
IKM Panama Holding B.V. Netherlands
Industrias Del Tabaco, Alimentos Y Bebidas S.A. Ecuador
International Trademarks Incorporated Delaware
Intertaba S.p.A. Italy
Ioniki Trading S.A. Greece
ITSC Asia Pacific Pty Ltd. Australia
KFI-USLLC I Delaware
KFI-USLLC V Delaware
KFI-USLLC VII Delaware
KFI-USLLC IX Delaware
KFI-USLLC XI Delaware
KJS India Private Limited India
Kraft Canada Inc. Canada
Kraft Food Ingredients Corp. Delaware
Kraft Foods (Australia) Limited Australia
Kraft Foods (Beijing) Company Limited China
Kraft Foods (China) Company Limited China
Kraft Foods (New Zealand) Limited New Zealand
Kraft Foods (Philippines), Inc. Philippines
Kraft Foods (Puerto Rico), Inc. Puerto Rico
Kraft Foods (Singapore) Pte Ltd. Singapore
Kraft Foods (Thailand) Limited Thailand
Kraft Foods (Trinidad) Unlimited Trinidad
Kraft Foods Argentina S.A. Argentina
Kraft Foods AS Norway
Kraft Foods Asia Pacific Holding LLC Delaware
Kraft Foods Aviation, LLC Wisconsin
Kraft Foods Belgium S.A. Belgium
Kraft Foods Brasil S.A. Brazil
Kraft Foods Bulgaria AD Bulgaria
Exhibit 21
Kraft Foods Caribbean Sales Corp. Delaware
Kraft Foods Central & Eastern Europe Service BV Netherlands
Kraft Foods Chile S.A. Chile
Kraft Foods Colombia Ltda Colombia
Kraft Foods Colombia S.A. Colombia
Kraft Foods Costa Rica, S.A. Costa Rica
Kraft Foods CR s.r.o. Czech Republic
Kraft Foods Danmark ApS Denmark
Kraft Foods Danmark Holding A/S Denmark
Kraft Foods de Mexico, S. de R.L. de C.V. Mexico
Kraft Foods Deutschland GmbH Germany
Kraft Foods Deutschland Holding GmbH Germany
Kraft Foods Dominicana, S.A. Dominican Republic
Kraft Foods Ecuador S.A. Ecuador
Kraft Foods Egypt LLC Egypt
Kraft Foods El Salvador S.A. de C.V. El Salvador
Kraft Foods Espana, S.A. Spain
Kraft Foods European Services Center s.r.o. Slovakia
Kraft Foods Finance Europe AG Switzerland
Kraft Foods France France
Kraft Foods Global, Inc. Delaware
Kraft Foods Hellas S.A. Greece
Kraft Foods Holding (Europa) GmbH Switzerland
Kraft Foods Holdings, Inc. Delaware
Kraft Foods Holland Holding B.V. Netherlands
Kraft Foods Honduras, S.A. Honduras
Kraft Foods Hungaria Kft. Hungary
Kraft Foods Inc. Virginia
Kraft Foods International (EU) Ltd. United Kingdom
Kraft Foods International CEEMA Austria
Kraft Foods International Services, Inc. Delaware
Kraft Foods International, Inc. Delaware
Kraft Foods Ireland Limited Ireland
Kraft Foods Italia S.p.A. Italy
Kraft Foods Jamaica Limited Jamaica
Kraft Foods Latin America Holding LLC Delaware
Kraft Foods Laverune SNC France
Kraft Foods Limited Australia
Kraft Foods Limited (Asia) Hong Kong
Kraft Foods Manufacturing Corporation Delaware
Kraft Foods Manufacturing Midwest, Inc. Delaware
Kraft Foods Manufacturing West, Inc. Delaware
Kraft Foods Maroc SA Morocco
Kraft Foods Mexico Holding I B.V. Netherlands
Kraft Foods Mexico Holding II B.V. Netherlands
Kraft Foods Middle East & Africa Ltd. United Kingdom
Kraft Foods Namur S.A. Belgium
Kraft Foods Nederland B.V. Netherlands
Kraft Foods Nicaragua S.A. Nicaragua
Kraft Foods Norge AS Norway
Kraft Foods Oesterreich GmbH Austria
Kraft Foods Panama, S.A. Panama
Exhibit 21
Kraft Foods Peru S.A. Peru
Kraft Foods Polska Sp.z o.o. Poland
Kraft Foods Portugal Produtos Alimentares Lda. Portugal
Kraft Foods Puerto Rico Holding LLC Delaware
Kraft Foods Romania SA Romania
Kraft Foods Schweiz AG Switzerland
Kraft Foods Schweiz Holding AG Switzerland
Kraft Foods Slovakia, a.s. Slovakia
Kraft Foods South Africa Pty Ltd. South Africa
Kraft Foods Strasbourg SNC France
Kraft Foods Sverige AB Sweden
Kraft Foods Sverige Holding AB Sweden
Kraft Foods Taiwan Holdings LLC Delaware
Kraft Foods Taiwan Limited Taiwan
Kraft Foods UK Ltd. United Kingdom
Kraft Foods Uruguay S.A. Uruguay
Kraft Foods Venezuela, C.A. Venezuela
Kraft Foods Zagreb d.o.o. Croatia
Kraft Gida Sanayi Ve Ticaret Anonim Sirketi Turkey
Kraft Guangtong Food Company, Limited China
Kraft Insurance (Ireland) Limited Ireland
Kraft Jacobs Suchard (Australia) Pty Ltd. Australia
Kraft Jacobs Suchard La Vosgienne France
Kraft Japan, K.K. Japan
Kraft Pizza Company Delaware
Kraft Reinsurance (Ireland) Limited Ireland
Kraft Tianmei Food (Tianjin) Co., Ltd. China
Krema Limited Ireland
KTL S. de R.L. de C.V. Mexico
Lanes Biscuits Pty Ltd Australia
Lanes Food (Australia) Pty Ltd Australia
Le Rhone Investment Corp. Delaware
Lowney Inc. Canada
Management Subsidiary Holdings Inc. Virginia
Massalin Particulares S.A. Argentina
Mendiola y Compania, S.A. Costa Rica
Michigan Investment Corp. Delaware
Mirabell Salzburger Confiserie-Und Bisquit GmbH Austria
Nabisco Arabia Co. Ltd. Saudi Arabia
Nabisco Caribbean Export, Inc. Delaware
Nabisco de Nicaragua, S.A. Nicaragua
Nabisco Euro Holdings Ltd. Cayman Islands
Nabisco Food (Suzhou) Co. Ltd. China
Nabisco Group Ltd. Delaware
Nabisco Inversiones S.R.L. Argentina
Nabisco Investments, Inc. Delaware
Nabisco Taiwan Corporation Taiwan
Nabisco, Inc. Foreign Sales Corporation U.S. Virgin
Islands
NISA Holdings LLC Delaware
NSA Holding LLC Delaware
OAO Philip Morris Kuban Russia
OMFC Service Company Delaware
Exhibit 21
One Channel Corp. Delaware
OOO Kraft Foods Rus Russia
OOO Kraft Foods Sales & Marketing Russia
OOO Kraft Foods Russia
Orecla Realty, Inc. Philippines
Oy Kraft Foods Finland Ab Finland
P.T. Kraft Ultrajaya Indonesia Indonesia
P.T. Sampoerna JL Sdn. Bhd. Malaysia
Papastratos Cigarette Manufacturing Company S.A. Greece
Papastratos International BV Netherlands
Park (U.K.) Limited United Kingdom
Park 1989 B.V. Netherlands
Park Export Corporation Virgin Islands
Park International S.A. Switzerland
Phenix Leasing Corporation Delaware
Phenix Management Corporation Delaware
Philip Morris (Australia) Limited Australia
Philip Morris (China) Management Co. Ltd. China
Philip Morris (Malaysia) Sdn. Bhd. Malaysia
Philip Morris (Portugal) Empresa Comercial de Tabacos, Limitada Portugal
Philip Morris (Thailand) Ltd Delaware
Philip Morris AB Sweden
Philip Morris ApS Denmark
Philip Morris Asia Limited Hong Kong
Philip Morris Belgium BVBA Belgium
Philip Morris Belgrade D.o.o. Serbia
Philip Morris Benelux B.V.B.A. Belgium
Philip Morris Brasil Industria e Comercio Ltda. Brazil
Philip Morris Brasil S.A. Delaware
Philip Morris Capital Corporation Delaware
Philip Morris Chile Comercializadora Ltda Chile
Philip Morris China Holdings Sarl Switzerland
Philip Morris Colombia S.A. Colombia
Philip Morris CR a.s. Czech Republic
Philip Morris Duty Free Inc. Delaware
Philip Morris Eesti Osauhing Estonia
Philip Morris Exports Sarl Switzerland
Philip Morris Finland OY Finland
Philip Morris France S.A.S. France
Philip Morris GmbH Germany
Philip Morris Holland B.V. Netherlands
Philip Morris Hungary Cigarette Trading Ltd. Hungary
Philip Morris India Private Ltd. India
Philip Morris Information Services Limited Australia
Philip Morris International Finance Corporation Delaware
Philip Morris International Holdings GmbH Switzerland
Philip Morris International Inc. Delaware
Philip Morris International Investments Inc. Delaware
Philip Morris International Management SA Switzerland
Philip Morris International Services Sarl Switzerland
Philip Morris Investments Sarl Switzerland
Philip Morris Italia Srl Italy
Philip Morris Japan Kabushiki Kaisha Japan
Philip Morris Kazakhstan LLP Kazakhstan
Philip Morris Korea Inc. Korea
Philip Morris Kuwait Company W.L.L. Kuwait
Philip Morris Latin America & Canada Inc. Delaware
Exhibit 21
Philip Morris Latin America Sales Corp. Delaware
Philip Morris Limited United Kingdom
Philip Morris Ljubljana d.o.o. Slovenia
Philip Morris Luxembourg S.a.r.l. Luxembourg
Philip Morris Management Services B.V. Netherlands
Philip Morris Management Services SA Switzerland
Philip Morris Mexico, S.A. de C.V. Mexico
Philip Morris Nicaragua S.A. Nicaragua
Philip Morris Overseas Investment Corp. Delaware
Philip Morris Paraguay S.A. Paraguay
Philip Morris Participations B.V. Netherlands
Philip Morris Peru S.A. Peru
Philip Morris Philippines Manufacturing Inc. Philippines
Philip Morris Polska S.A. Poland
Philip Morris Products Inc. Virginia
Philip Morris Products S.A. Switzerland
Philip Morris Research Laboratories BVBA Belgium
Philip Morris Research Laboratories GmbH Germany
Philip Morris Reunion s.a.r.l. France
Philip Morris Romania S.R.L. Romania
Philip Morris SA, Philip Morris Sabanci Pazarlama ve Satis A.S. Turkey
Philip Morris Sales & Marketing Ltd. Russia
Philip Morris Sdn Bhd Brunei
Philip Morris Services India S.A. Switzerland
Philip Morris Services S.A. Switzerland
Philip Morris Singapore Pte. Ltd. Singapore
Philip Morris Skopje d.o.o.e.l. Macedonia
Philip Morris Slovakia s.r.o. Slovakia
Philip Morris South Africa (Pty) Ltd. South Africa
Philip Morris Spain, S.L., Sociedad Unipersonal Spain
Philip Morris Taiwan S.A. Switzerland
Philip Morris USA Inc. Virginia
Philip Morris Vietnam S.A. Switzerland
Philip Morris West & Central Africa SARL Benin
Philip Morris West Africa SARL Senegal
Philip Morris World Trade S.a.r.l. Switzerland
Philip Morris Zagreb d.o.o. Croatia
PHILSA Philip Morris Sabanci Sigara ve Tutunculuk Sanayi ve Ticaret A.S. Turkey
PMCC Europe GmbH Germany
PMCC Investors No. 1 Corporation Delaware
PMCC Investors No. 2 Corporation Delaware
PMCC Investors No. 3 Corporation Delaware
PMCC Investors No. 4 Corporation Delaware
PMCC Leasing Corporation Delaware
PMI Aviation Services SA Switzerland
PMI Engineering S.A. Switzerland
PMI Global Services Inc. Delaware
PMM-S.G.P.S., S.A. Portugal
Productos Kraft, S. de R.L.de C.V. Mexico
Produtos Alimenticios Pilar Ltda. Brazil
Proesa, Sociedad Anonima Guatemala
Proveedora Ecuatoriana S.A. (Proesa) Ecuador
PT Asia Tembakau Indonesia
PT Graha Sampoerna Indonesia
PT Handal Logistik Nusantara Indonesia
PT Hanjaya Mandala Sampoerna Tbk. Indonesia
PT Integrated Business Solution Asia Indonesia
Exhibit 21
PT Kraft Foods Indonesia Limited Indonesia
PT Nabisco Foods Indonesia
PT Perusahaan Dagang dan Industri Panamas Indonesia
PT Philip Morris Indonesia Indonesia
PT Sampoerna Air Nusantara Indonesia
PT Sampoerna Printpack Indonesia
PT Sumber Alfaria Trijaya Indonesia
PT Taman Dayu Indonesia
PT Wahana Sampoerna Indonesia
Riespri S.L. Spain
Sampoerna Asia Pte Ltd Singapore
Sampoerna International Finance Company B.V. Netherlands
Sampoerna International Pte Ltd Singapore
Sampoerna Investment Corporation British Virgin
Islands
Sampoerna Latin America Limited British Virgin
Islands
Sampoerna Taiwan Corporation British Virgin
Islands
Sampoerna Tobacos America Latina Ltda. Brazil
SB Leasing Inc. Delaware
Servicios Corporativos Philip Morris, S. de R. L. de C. V. Mexico
Seven Seas Foods, Inc. Delaware
SIA Philip Morris Latvia Latvia
Stella D'oro Biscuit Co., Inc. New York
Sterling Tobacco Corporation Philippines
Tabacalera Andina SA (Tanasa) Ecuador
Tabacalera Centroamericana, S.A. Guatemala
Tabacalera Costarricense S.A. Costa Rica
Tabacalera de El Salvador S.A. de C.V. El Salvador
Tabamark S.A. Uruguay
Tabaqueira, S.A. Portugal
Taloca AG Switzerland
Taloca Cafe Ltda Brazil
Taloca y Cia Ltda. Colombia
Tanasec Panama Sociedad en Comandita por Acciones Panama
Tassimo Corporation Delaware
Technology Enterprise Computing Works, LLC Virginia
The Hervin Company Oregon
The United Kingdom Tobacco Company Limited United Kingdom
Trademarks LLC Delaware
Trimaran Leasing Investors, L.L.C.-II Delaware
UAB Philip Morris Lietuva Lithuania
Veryfine Products, Inc. Massachusetts
Vict. Th. Engwall & Co., Inc. Delaware
Vinasa Investment Corporation British Virgin
Islands
Votesor BV Netherlands
Wolverine Investment Corp. Delaware
Yili-Nabisco Biscuit & Food Company Limited China
ZAO Philip Morris Izhora Russia
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in Post-Effective Amendment
No. 13 to the Registration Statement of Altria Group, Inc. on Form S-14 (File
No. 2-96149) and in Altria Group, Inc.'s Registration Statements on Form S-3
(File No. 333-35143) and Forms S-8 (File Nos. 333-28631, 333-20747, 333-16127,
33-1479, 33-10218, 33-13210, 33-14561, 33-1480, 33-17870, 33-38781, 33-39162,
33-37115, 33-40110, 33-48781, 33-59109, 333-43478, 333-43484, 333-128494 and
333-71268), of our report dated February 7, 2006 relating to the consolidated
financial statements, management's assessment of the effectiveness of internal
control over financial reporting, and the effectiveness of internal control over
financial reporting of Altria Group, Inc., which appears in the Annual Report to
Shareholders, which is incorporated in the Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated February 7, 2006
relating to the financial statement schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 10, 2006
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, her true and lawful attorney, for her and in her name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal this 25th
day of February, 2006.
/s/ ELIZABETH E. BAILEY
Elizabeth E. Bailey
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ HAROLD BROWN
Harold Brown
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ MATHIS CABIALLAVETTA
Mathis Cabiallavetta
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 26th
day of February, 2006.
/s/ LOUIS C. CAMILLERI
Louis C. Camilleri
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ J. DUDLEY FISHBURN
J. Dudley Fishburn
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ ROBERT E. R. HUNTLEY
Robert E. R. Huntley
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ THOMAS W. JONES
Thomas W. Jones
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ GEORGE MUNOZ
George Munoz
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ LUCIO A. NOTO
Lucio A. Noto
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ JOHN S. REED
John S. Reed
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT THAT the undersigned, a Director of Altria Group,
Inc., a Virginia corporation (the 'Company'), does hereby constitute and appoint
Louis C. Camilleri, Dinyar S. Devitre and Charles R. Wall, or any one or more of
them, his true and lawful attorney, for his and in his name, place and stead, to
execute, by manual or facsimile signature, electronic transmission or otherwise,
the Annual Report on Form 10-K of the Company for the year ended December 31,
2005 and any amendments or supplements to said Annual Report and to cause the
same to be filed with the Securities and Exchange Commission, together with any
exhibits, financial statements and schedules included or to be incorporated by
reference therein, hereby granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite or desirable to
be done in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things which said attorneys may do or cause to be done by virtue of
these present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 25th
day of February, 2006.
/s/ STEPHEN M. WOLF
Stephen M. Wolf
Exhibit 31.1
Certifications
I, Louis C. Camilleri, certify that:
1. I have reviewed this annual report on Form 10-K of Altria Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: March 10, 2006
/S/ LOUIS C. CAMILLERI
Louis C. Camilleri
Chairman and Chief Executive Officer
Exhibit 31.2
Certifications
I, Dinyar S. Devitre, certify that:
1. I have reviewed this annual report on Form 10-K of Altria Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: March 10, 2006
/s/ DINYAR S. DEVITRE
Senior Vice President and
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Altria Group, Inc. (the 'Company') on
Form 10-K for the period ended December 31, 2005 as filed with the Securities
and Exchange Commission on the date hereof (the 'Report'), I, Louis C.
Camilleri, Chairman and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/S/ LOUIS C. CAMILLERI
Louis C. Camilleri
Chairman and Chief
Executive Officer
March 10, 2006
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Altria Group, Inc. and will be
retained by Altria Group, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Altria Group, Inc. (the 'Company') on
Form 10-K for the period ended December 31, 2005 as filed with the Securities
and Exchange Commission on the date hereof (the 'Report'), I, Dinyar S. Devitre,
Senior Vice President and Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ DINYAR S. DEVITRE
Dinyar S. Devitre
Senior Vice President
and
Chief Financial Officer
March 10, 2006
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Altria Group, Inc. and will be
retained by Altria Group, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
Exhibit 99.1
CERTAIN PENDING LITIGATION MATTERS AND RECENT DEVELOPMENTS
As described in Item 3. Legal Proceedings of this Annual Report on Form 10-K and
Note. 19 Contingencies to Altria Group Inc.'s Consolidated Financial Statements
included in Exhibit 13 hereto, there are legal proceedings covering a wide range
of matters pending in various U.S. and foreign jurisdictions against ALG, its
subsidiaries and affiliates, including PM USA and PMI, and their respective
indemnitees. Various types of claims are raised in these proceedings, including
product liability, consumer protection, antitrust, tax, contraband shipments,
patent infringement, employment matters, claims for contribution and claims of
competitors and distributors. Pending claims related to tobacco products
generally fall within the following categories: (i) smoking and health cases
alleging personal injury brought on behalf of individual plaintiffs, (ii)
smoking and health cases primarily alleging personal injury or seeking
court-supervised programs for ongoing medical monitoring and purporting to be
brought on behalf of a class of individual plaintiffs, including cases in which
the aggregated claims of a number of individual plaintiffs are to be tried in a
single proceeding, (iii) health care cost recovery cases brought by governmental
(both domestic and foreign) and non-governmental plaintiffs seeking
reimbursement for health care expenditures allegedly caused by cigarette smoking
and/or disgorgement of profits, (iv) class action suits alleging that the uses
of the terms 'Lights' and 'Ultra Lights' constitute deceptive and unfair trade
practices, common law fraud or RICO violations, and (v) other tobacco-related
litigation. Other tobacco-related litigation includes suits by foreign
governments seeking to recover damages resulting from the allegedly illegal
importation of cigarettes into various jurisdictions, suits by former asbestos
manufacturers seeking contribution or reimbursement for amounts expended in
connection with the defense and payment of asbestos claims that were allegedly
caused in whole or in part by cigarette smoking, and various antitrust suits.
The following lists certain of the pending claims included in these categories
and certain other pending claims. Certain developments in these cases since
November 1, 2005 are also described.
SMOKING AND HEALTH LITIGATION
The following lists the consolidated individual smoking and health cases as well
as smoking and health class actions pending against PM USA and, in some cases,
ALG and/or its other subsidiaries and affiliates, including PMI, as of February
15, 2006, and describes certain developments in these cases since November 1,
2005.
Consolidated Individual Smoking and Health Cases
In re: Tobacco Litigation (Individual Personal Injury cases), Circuit Court,
Ohio County, West Virginia, consolidated January 11, 2000. In West Virginia, all
smoking and health cases in state court alleging personal injury have been
transferred to the State's Mass Litigation Panel. The transferred cases include
individual cases and putative class actions. All individual cases filed in or
transferred to the court by September 13, 2000 were consolidated for pretrial
proceedings and trial. Nine hundred and twenty-eight (928) individual cases are
pending. The trial court's prior Case Management Order/Trial Plan that had
consolidated the individual cases for trial was vacated in June 2004. The trial
court has not adopted an alternative plan for trying the individual cases. In
December 2005, the West
Exhibit 99.1
Virginia Supreme Court of Appeals ruled that the United States Constitution does
not preclude a trial in two phases in this case. Issues related to defendants'
conduct, plaintiffs' entitlement to punitive damages and a punitive damages
multiplier, if any, would be determined in the first phase. The second phase
would consist of individual trials to determine liability, if any, and
compensatory damages.
Flight Attendant Litigation
The settlement agreement entered into in 1997 in the case of Broin, et al. v.
Philip Morris Companies Inc., et al., which was brought by flight attendants
seeking damages for personal injuries allegedly caused by environmental tobacco
smoke, allows members of the Broin class to file individual lawsuits seeking
compensatory damages, but prohibits them from seeking punitive damages. In
October 2000, the trial court ruled that the flight attendants will not be
required to prove the substantive liability elements of their claims for
negligence, strict liability and breach of implied warranty in order to recover
damages, if any, other than establishing that the plaintiffs' alleged injuries
were caused by their exposure to environmental tobacco smoke and, if so, the
amount of compensatory damages to be awarded. Defendants' initial appeal of this
ruling was dismissed as premature. Defendants appealed the October 2000 rulings
in connection with their appeal of the adverse jury verdict in the French case.
In December 2004, the Florida Third District Court of Appeal affirmed the
judgment awarding plaintiff in the French case $500,000, and directed the trial
court to hold defendants jointly and severally liable. Defendants' motion for
rehearing was denied in April 2005. In December 2005, after exhausting all
appeals, PM USA paid $328,759 (including interest of $78,259) as its share of
the judgment amount and interest in French and will pay attorneys' fees yet to
be determined. As of February 15, 2006, 2,626 cases were pending in the Circuit
Court of Dade County, Florida against PM USA and three other cigarette
manufacturers, and to date, no cases are scheduled for trial through the end of
2006.
Domestic Class Actions
Engle, et al. v. R.J. Reynolds Tobacco Co., et al., Circuit Court, Eleventh
Judicial Circuit, Dade County, Florida, filed May 5, 1994. See Item 3. Legal
Proceedings, for a discussion of this case.
Scott, et al. v. The American Tobacco Company, et al., Civil District Court,
Orleans Parish, Louisiana, filed May 24, 1996. See Item 3. Legal Proceedings,
for a discussion of this case.
Young, et al. v. The American Tobacco Company, et al., Civil District Court,
Orleans Parish, Louisiana, filed November 12, 1997.
Parsons, et al. v. A C & S, Inc., et al., Circuit Court, Kanawha County, West
Virginia, filed February 27, 1998.
Cleary, et al. v. Philip Morris Incorporated, et al., Circuit Court, Cook
County, Illinois, filed June 3, 1998. Defendants' motion to dismiss a nuisance
claim is pending.
Exhibit 99.1
Cypret, et al. v. The American Tobacco Company, et al., Circuit Court, Jackson
County, Missouri, filed December 22, 1998.
Simms, et al. v. Philip Morris Incorporated, et al., United States District
Court, District of Columbia, filed May 23, 2001. In May 2004, plaintiffs filed a
motion for reconsideration of the court's 2003 ruling that denied their motion
for class certification. In September 2004, plaintiffs renewed their motion for
reconsideration.
Lowe, et al. v. Philip Morris Incorporated, et al., Circuit Court, Multnomah,
Oregon, filed November 19, 2001. In September 2003, the court granted
defendants' motion to dismiss the complaint, and plaintiffs have appealed.
Caronia, et al. v. Philip Morris USA, Inc., United States District Court,
Eastern District of New York, filed January 13, 2006. See Item 3. Legal
Proceedings, for a discussion of this case.
International Class Actions
The Smoker Health Defense Association (ADESF) v. Souza Cruz, S.A. and Philip
Morris Marketing, S.A., Nineteenth Lower Civil Court of the Central Courts of
the Judiciary District of Sao Paulo, Brazil, filed July 25, 1995. The trial
court has issued an order finding that the action was valid under the Brazilian
Consumer Defense Code. The order contemplates a second stage of the case in
which individuals are to file their claims. The trial court awarded the
equivalent of approximately $350 per smoker per year of smoking for moral
damages and has indicated that material damages, if any, will be assessed in a
second phase of the case. Defendants appealed and in March 2006, the 2nd Public
Chamber of the Court of Appeals of Sao Paulo ruled that it does not have
jurisdiction over the appeal because the case does not involve a matter of
public law. The appeal will now be transferred to one of the private chambers of
the Court of Appeals of Sao Paulo and assigned to a new judge. The trial court
has granted defendants' motion to stay its decision while the appeal is pending.
Polish Association for the Promotion of Health and Health Education in the Work
Environment v. Philip Morris Polska S.A., District Court, Warsaw, Poland, filed
February 4, 2005.
Sasson, et al. v. Philip Morris International Inc., et al., District Court, Tel
Aviv, Israel, filed July 11, 2005. Plaintiffs' motion for class certification is
pending.
HEALTH CARE COST RECOVERY LITIGATION
The following lists the health care cost recovery actions pending against PM USA
and, in some cases, ALG and/or its other subsidiaries and affiliates as of
February 15, 2006 and describes certain developments in these cases since
November 1, 2005. As discussed in Item 3. Legal Proceedings, in 1998, PM USA and
certain other United States tobacco product manufacturers entered into a Master
Settlement Agreement (the 'MSA') settling the health care cost recovery claims
of 46 states, the District of Columbia, the Commonwealth of Puerto Rico, Guam,
the United States Virgin Islands, American Samoa and the Northern Marianas.
Settlement agreements settling similar claims had previously been entered into
with the states of Mississippi, Florida, Texas and Minnesota. PM USA believes
that the claims in the city/county, taxpayer and certain of the other health
care cost recovery actions listed below are released in whole or in part by the
MSA or that recovery in any such actions should be subject to the offset
provisions of the MSA.
Exhibit 99.1
City of St. Louis Case
City of St. Louis, et al. v. American Tobacco, et al., Circuit Court, City of
St. Louis, Missouri, filed November 23, 1998. In November 2001, the court
granted in part and denied in part defendants' motion to dismiss and dismissed
three of plaintiffs' 11 claims. In June 2005, the court granted in part
defendants' motion for summary judgment limiting plaintiffs' claims for past
compensatory damages to those that accrued after November 16, 1993, five years
prior to the filing of the suit. The case remains pending without a trial date.
Department of Justice Case
The United States of America v. Philip Morris Incorporated, et al., United
States District Court, District of Columbia, filed September 22, 1999. See Item
3. Legal Proceedings, for a discussion of this case.
International Cases
The Republic of Panama v. The American Tobacco Company, Inc., District Court,
Orleans Parish, Louisiana, filed September 11, 1998. In March 2005, the trial
court dismissed the case without prejudice on the basis of forum non conveniens.
Plaintiff filed two motions for reconsideration, and both motions were denied.
In July 2005, plaintiff refiled its complaint in state court in Delaware, and in
December 2005, it withdrew a motion to appeal in Louisiana.
Kupat Holim Clalit v. Philip Morris USA, et al., Jerusalem District Court,
Israel, filed September 28, 1998. Defendants' motion to dismiss the case has
been denied by the district court. In June 2004, defendants filed a motion with
the Israel Supreme Court for leave to appeal. The appeal was heard by the
Supreme Court in March 2005, and the parties are awaiting the court's decision.
The Caisse Primaire d'Assurance Maladie of Saint-Nazaire v. SEITA, et al., Civil
Court of Saint-Nazaire, France, filed June 1999. In September 2003, the court
dismissed the case, and plaintiff has appealed.
In re: Tobacco/Governmental Health Care Costs Litigation (MDL No. 1279), United
States District Court, District of Columbia, consolidated June 1999. In June
1999, the United States Judicial Panel on Multidistrict Litigation transferred
foreign government health care cost recovery actions brought by Nicaragua,
Venezuela, and Thailand to the District of Columbia for coordinated pretrial
proceedings with two such actions brought by Bolivia and Guatemala already
pending in that court. Subsequently, the resulting proceeding has also included
filed cases brought by the following foreign governments: Ukraine; the Brazilian
States of Espirito Santo, Goias, Mato Grosso do Sul, Para, Parana, Pernambuco,
Piaui, Rondonia, Sao Paulo and Tocantins; Panama; the Province of Ontario,
Canada; Ecuador; the Russian Federation; Honduras; Tajikistan; Belize; the
Kyrgyz Republic and
Exhibit 99.1
11 Brazilian cities. The cases brought by Thailand and the Kyrgyz Republic were
voluntarily dismissed. The complaints filed by Guatemala, Nicaragua, Ukraine and
the Province of Ontario have been dismissed, and the dismissals are now final.
The district court remanded the cases brought by Belize, Ecuador, Honduras, the
Russian Federation, Tajikistan, Venezuela, nine Brazilian states and the 11
Brazilian cities to Florida state courts and remanded the cases brought by one
Brazilian state and Panama to Louisiana state court. Subsequent to remand, the
Ecuador case was voluntarily dismissed. In November 2001, the Venezuela and
Espirito Santo actions were dismissed, and Venezuela appealed. In September
2002, a Florida intermediate appellate court affirmed the ruling dismissing the
case brought by Venezuela. In June 2003, the Florida Supreme Court denied
Venezuela's petition for further review. In August 2003, the trial court granted
defendants' motions to dismiss the cases brought by Tajikistan and one Brazilian
state, and plaintiffs in the other 21 cases then pending in Florida voluntarily
dismissed their claims without prejudice. In December 2004, the parties in the
case brought by Bolivia filed a stipulation of dismissal without prejudice. In
February 2005, the Texas Supreme Court refused to hear the appeal of the
dismissal of the case brought by the State of Rio de Janeiro (Brazil). In March
2005, the trial court in Louisiana dismissed the cases brought by Panama and one
Brazilian state without prejudice on the basis of forum non conveniens.
Plaintiffs filed two motions for reconsideration, which have been denied. The
Brazilian state has also appealed, and has also indicated its intention to
voluntarily dismiss the appeal once courts in New Orleans reopen. Both
plaintiffs have also refiled their complaints in state court in Delaware.
The State of Sao Paulo of the Federal Republic of Brazil v. Philip Morris
Companies Inc., et al., Civil District Court, Orleans Parish, Louisiana, filed
February 9, 2000. In March 2005, the trial court dismissed the case without
prejudice on the basis of forum non conveniens. Plaintiff filed two motions for
reconsideration, and both motions were denied. Plaintiff refiled its complaint
in state court in Delaware in July 2005, and in December 2005, it withdrew a
motion to appeal in Louisiana.
Her Majesty the Queen in Right of British Columbia v. Imperial Tobacco Limited,
et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed
January 24, 2001. In June 2003, the trial court granted defendants' motion to
dismiss the case, and plaintiff appealed. In May 2004, the appellate court
reversed the trial court's decision. Defendants appealed. In September 2005, the
Supreme Court of Canada ruled that the legislation permitting the lawsuit is
constitutional, and as a result, the case will proceed before the trial court.
Junta de Andalucia, et al. v. Philip Morris Spain, et al., Court of First
Instance, Madrid, Spain, filed February 21, 2002. In May 2004, the court
dismissed the case, and plaintiffs appealed. In February 2006, the High Court of
Appeal of Madrid dismissed plaintiffs' appeal.
The Republic of Panama v. The American Tobacco Company, Inc., Superior Court,
New Castle County, Delaware, filed July 21, 2005.
The State of Sao Paulo of the Federative Republic of Brazil v. The American
Tobacco Company, et al., Superior Court, New Castle County, Delaware, filed July
21, 2005.
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