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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 25, 1997
PHILIP MORRIS COMPANIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 1-8940 13-3260245
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
120 PARK AVENUE, NEW YORK, NEW YORK 10017-5592
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 880-5000
___________________________________________________________
(Former name or former address, if changed since last report)
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Item 5. Other Events.
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Florida Settlement
On August 25, 1997, together with other companies in the United States
tobacco industry, Philip Morris Incorporated ("PM Inc."), the Company's domestic
tobacco subsidiary, entered into a Settlement Agreement with the State of
Florida to settle and resolve with finality all present and future economic
claims by the State and its subdivisions relating to the use of or exposure to
tobacco products. The Settlement Agreement is attached as Exhibit 10 hereto and
the following summary of the Settlement Agreement is qualified by reference
thereto.
Under the Settlement Agreement, the settling defendants will deposit $550
million, representing the State's estimate of its share of the $10 billion
initial payment under the proposed federal resolution (the "Resolution")
described in the Company's Current Report on Form 8-K, dated July 2, 1997, in an
escrow account on or before September 15, 1997. This amount will be allocated
among the settling defendants in accordance with their relative market
capitalization, which would result in a payment by PM Inc. of approximately
$371 million.
On September 15, 1998 and annually thereafter on December 31, the settling
defendants will make ongoing payments into a special account for the benefit of
the State in the following amounts: 1998: $220 million; 1999: $247.5 million;
2000: $275 million; 2001: $357.5 million; and each year thereafter: $440
million. These amounts equal that portion of the annual industry payments under
the Resolution which is contemplated to be paid to the State. These payments
would be adjusted for inflation and changes in volume as provided in the
Resolution. The settling defendants will also reimburse the State's expenses and
those of its attorneys, currently estimated to be $22 million. The settling
defendants have also agreed to pay reasonable attorneys' fees to Florida's
private counsel. The amount of such fees will be set by a panel of independent
arbitrators but in no event will the industry be required under the Settlement
Agreement to pay more than $500 million per year towards fee awards for all
attorneys nationwide. Each of these payments would be allocated among the
settling defendants in accordance with their relative unit volume of domestic
tobacco product sales.
The settling defendants also will support a two-year pilot program by the
State aimed at reducing the use of tobacco products by persons under the age of
eighteen, and will pay into another escrow account $200 million on or before
September 15, 1997 for the pilot program. The settling defendants also agreed to
discontinue all tobacco product billboards, signs in arenas and stadia and
transit advertisements in the State. Under the terms of a prior agreement with
the State of Mississippi, which grants that State "most favored nation"
treatment, the settling defendants will, in addition, pay to Mississippi
approximately $60 million to reflect the terms of the Florida pilot program. A
similar agreement on tobacco product billboards, signs in arenas and stadia and
transit advertisements will also apply in Mississippi.
The settling defendants also agreed to support new legislative and
administrative initiatives to prohibit the sale of cigarettes in vending
machines, except in adult-only facilities, and to
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strengthen civil penalties for sales of tobacco products to minors and for
possession of tobacco products by minors.
If legislation implementing the Resolution or its substantial equivalent is
enacted, the Settlement Agreement will remain in place, but the terms of the
federal legislation will supersede the Settlement Agreement (except for the
terms of the pilot program and payments thereunder) and the ongoing payments
described above will be adjusted so that the State would receive the same
payments as it would receive under the Resolution, provided that in all events
Florida will be entitled to the amount of the initial payment described above
without any adjustment.
The Settlement Agreement also provides that if federal legislation
implementing the Resolution or its substantial equivalent is enacted, the
parties contemplate that the State of Florida and any other similar state which
has made an exceptional contribution to secure resolution of these matters may
apply to a panel of independent arbitrators for reasonable compensation for its
efforts in securing the Resolution. The settling defendants have agreed not to
oppose applications of $250 million in the case of Florida and $75 million in
the case of Mississippi, in each case payable over five years. The parties have
agreed to a nationwide annual cap for all such payments of $100 million.
The Settlement Agreement also provides that if the settling defendants
enter into any future pre-verdict settlement agreement with a non-federal
governmental plaintiff on more favorable terms (after due consideration of
relevant differences in population or other appropriate factors), Florida will
obtain treatment at least as relatively favorable as such governmental
plaintiff.
The Settlement Agreement provides that it is not an admission or concession
or evidence of any liability or wrongdoing on the part of any party, and is
entered into by the settling defendants solely to avoid the further expense,
inconvenience, burden and uncertainty of litigation.
Item 7. Exhibits.
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10. Settlement Agreement dated August 25, 1997 re: Florida Settlement.
99. Press Release dated August 25, 1997.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHILIP MORRIS COMPANIES INC.
BY /s/ G. PENN HOLSENBECK
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Vice President - Associate
General Counsel and Corporate
Secretary
DATE September 3, 1997
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