Word: settlements
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...days, the negotiators, exhausted and increasingly needy of fresh shirts, darted between Washington's Park Hyatt and ANA hotels, from conference room to mezzanine, hallway to bedroom conference call. Every so often, rumpled lawyers would emerge with wildly divergent claims about the progress of the fractious tobacco talks: a settlement was imminent, negotiators had hit the worst impasse since the start of deliberations on April 3, talks were on the brink of collapse. Wait! There's a settlement! (Well, almost...) Finally, at 3:30 p.m. last Friday, a chorus of state attorneys general gathered around a microphone...
...detractors who may prove only too happy to provide legislators with the ammunition to blow the proposal to bits. Among the attorneys general, the chief naysayer through most of last week was Minnesota's Hubert Humphrey III, who argued that his colleagues were pushing too quickly for a settlement. (And they in turn accused him of grandstanding.) "They're trying to rush this through before we realize we've had our pockets picked," Humphrey said at midweek. He claimed tobacco could pay more than twice the agreed-upon amount, or some $800 billion over the next quarter-century, without putting...
...public-health court, the American Lung Association reacted loudly. It opposes any limits on individual lawsuits or class actions, and expressed particular skepticism about the settlement's prohibitions on youth-oriented advertising. "The ability of the tobacco industry to reinvent itself and circumvent such restrictions," said Lung Association CEO John Garrison, "is remarkable...
...thinks business will be better, or it wouldn't have come this far. Profit margins on cigarettes are now about 34%. Last year Philip Morris had an operating profit of $4.2 billion on domestic cigarette sales of $12.5 billion. Unquestionably, tobacco is a cash crop that can cover the settlement tab and still reward stockholders. And with advertising and legal outlays likely to be scaled back, the industry can recover some of its costs immediately...
...jumped 9%, reaching a new high on Thursday, while No. 2 RJR rose 14%. Tobacco stocks have sold at a discount, compared with other packaged-goods company shares, because of the legal uncertainties. Many analysts expect the stocks to keep on chugging once Wall Street can reliably calculate the settlement costs. "As uncertainty is removed, the stocks move up," says Roy Burry, tobacco analyst at Oppenheimer & Co. Investors may be willing to pay up for the newfound safety of predictable, if lower, earnings...