Web Research: Contingencies

Go to the website of Altria Group, Inc. at http://www.altria.com/. Click on Annual Reports and select the most recent annual report available. Click on Financial Review, and then click on Notes to Consolidated Financial Statements. Scroll down to find the note on Contingencies and read two or three pages of this note.
Discussion Question
Please respond to this Discussion Question using the information from the Web Field Trip above. Take time to review the responses of your classmates and provide your feedback.
In your Web Field Trip, you were asked to research the contingent liabilities of Altria Group, Inc. What are the major business units of Altria Group? Why do you think the Altria Group Annual Report has so much discussion of contingencies? Based on your brief review of the Contingencies note, are you confident that Altria Group has reported ALL its liabilities?

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My Response:
Jill Stidd
20 Sep 08 1:27 PM MST

This financial page supports the subsidiaries that Altria owns, however I would like to add Kraft to this list as well, “Altria Group, Inc. is the name of the parent company of Philip Morris USA Inc., John Middleton Co., and Philip Morris Capital Corporation. As of December 31, 2007, Altria Group also holds a 28.5% economic interest in SABMiller plc. (http://www.altria.com/investors/2_6_1_financialnews.asp)

I have to say that my research after reading the many pages of contingencies, litigations, and lawsuits that the tobacco industry produced have created amazing liabilities for the subsidiaries. It makes me question the fact that there was a name change to Altria Group, “The name change to Altria Group, Inc. was effective January 27, 2003. All news releases in this Financial News section of our Web site, prior to this change, will refer to the parent company's former name of Philip Morris Companies Inc. “ (http://www.altria.com/investors/2_6_1_financialnews.asp)

The second question /concern for me was reading about the “spin-off” of shares by both Phillip Morris and Kraft very recently, “On March 28, 2008, Altria completed the spin-off of 100% of the shares of Philip Morris International to Altria’s shareholders.(http://www.altria.com/investors/2_6_1_financialnews.asp).

The Board of Directors of Altria Group, Inc. voted on January 31, 2007, to authorize the spin off of all shares of Kraft Foods Inc. owned by Altria to Altria's shareholders. The distribution of the approximately 88.9% of Kraft's outstanding shares owned by Altria was made on March 30, 2007, to Altria shareholders of record as of 5:00 p.m Eastern Time on March 16, 2007” (http://www.altria.com/investors/2_2_2_kraftspinoff.asp).

I think that the amount of liability due to the contingencies was to great a burden for Altria. It is very clear from the mission statement of the company that they are trying to stress change and improvements for the industry’s that they have purchased. There was a great deal of transactions happening during 2007 with all these spin-offs. What I did read from the Altria company was about their level of integrity. “Altria Group's scale, market position, balance sheet strength and improved operational focus make the company one of the most compelling investment opportunities available in tobacco and consumer products.” (http://www.altria.com/investors/2_1_strategyfinancialgrowth.asp)

Ultimately I feel that they are committed to proper reporting for the integrity of their company, the historic subsidiaries that they have purchased, and the shareholders that are scrutinizing their every move.

http://www.altria.com/investors/2_6_1_financialnews.asp retrieved September 20,2008.http://www.altria.com/investors/2_2_2_kraftspinoff.asp retrieved September 20,2008.http://www.altria.com/investors/2_1_strategyfinancialgrowth.asp retrieved September 20,2008.