8-KFinancial EventsExhibits & Filings

ALTRIA GROUP, INC. 8-K Report, Exit or Disposal Costs (Jun 26, 2007)

Filed June 26, 2007For Securities:MO

Summary

This Form 8-K filing by Altria Group, Inc. (MO) on June 26, 2007, announces a significant restructuring of its tobacco manufacturing operations aimed at optimizing worldwide cigarette production. The plan involves shifting U.S.-based production for non-U.S. markets to Philip Morris International (PMI) facilities and closing the Philip Morris USA (PM USA) Cabarrus, NC manufacturing plant, consolidating U.S. market production in Richmond, VA. This strategic move is driven by declining U.S. cigarette volumes and PMI's decision to re-source its production. Investors should note the expected substantial cost savings of approximately $335 million annually by 2011, split between PMI and PM USA. However, this restructuring also comes with significant one-time costs, estimated at $670 million, primarily borne by PM USA, including employee separation and accelerated depreciation charges. A portion of these costs will be cash expenditures. Altria expects to record an initial charge of approximately $325 million in the second quarter of 2007.

Key Highlights

  • 1Altria is implementing a worldwide cigarette production optimization plan.
  • 2The plan includes closing the Philip Morris USA (PM USA) manufacturing facility in Cabarrus, NC.
  • 3U.S.-based production for non-U.S. markets will be moved to Philip Morris International (PMI) facilities in Europe.
  • 4PM USA will consolidate its U.S. market production at its Richmond, VA manufacturing center.
  • 5The program is projected to generate significant annual pre-tax cost savings of approximately $335 million by 2011.
  • 6Total estimated cumulative program expenses are approximately $670 million, primarily incurred by PM USA.
  • 7Altria expects to record an initial charge of about $325 million in Q2 2007 related to employee separation costs.

Frequently Asked Questions

The main purpose is to optimize worldwide cigarette production by consolidating manufacturing, responding to declining U.S. cigarette volumes and PMI's production sourcing decisions. This involves closing a U.S. plant and shifting some production overseas.

The plan is expected to yield significant annual cost savings of approximately $335 million by 2011. However, it also incurs substantial one-time program expenses of around $670 million, including employee separation costs, accelerated depreciation, and relocation charges, with about 66% of these charges resulting in cash expenditures.

Altria expects PM USA to record an initial charge of approximately $325 million in the second quarter of 2007, primarily for employee separation programs. Additional expenses and savings will be recognized over subsequent periods as the program is implemented.

Yes, the program involves both PM USA and PMI. PM USA will close its Cabarrus facility and consolidate U.S. production, while PMI will take on some U.S.-based production for non-U.S. markets and is expected to realize a portion of the total cost savings.