Altria Group, Inc. Announces Plans by Its Tobacco Subsidiaries to Optimize Worldwide Cigarette Production |
- Philip Morris International (PMI) to replace U.S.-sourced
cigarettes with increased production at European facilities by
third quarter of 2008
- Philip Morris USA (PM USA) to consolidate cigarette
manufacturing in Richmond, VA and close Cabarrus, NC
manufacturing facility by end of 2010
- Program expected to generate total annual pre-tax cost savings
of approximately $335 million by 2011, with cumulative total
expenses of approximately $670 million, of which $440 million
will be paid in cash
- PM USA to take initial pre-tax charge related to program of
approximately $325 million or $0.10 per Altria share in second
quarter of 2007
NEW YORK--(BUSINESS WIRE)--June 26, 2007--Altria Group, Inc.
(NYSE: MO) today announced plans by its tobacco subsidiaries to
optimize worldwide cigarette production by moving U.S.-based cigarette
production for non-U.S. markets to PMI facilities in Europe. Due to
declining U.S. cigarette volume, as well as PMI's decision to
re-source its production, PM USA will close its Cabarrus, NC
manufacturing facility and consolidate manufacturing for the U.S.
market at its Richmond, VA Manufacturing Center.
Altria Group, Inc. said that it expects PM USA to record an
initial pre-tax charge of approximately $325 million or $0.10 per
Altria share in the second quarter of 2007 for costs related to the
program, primarily for employee separation, with additional estimated
charges of approximately $50 million for the remainder of 2007.
The program is expected to generate pre-tax cost savings beginning
in 2008, with total estimated annual cost savings of approximately
$335 million by 2011, of which $179 million will be realized by PMI
and $156 million by PM USA. Cumulative total expenses through 2011 are
estimated at approximately $670 million, all of which will be at PM
USA. Expenses are summarized in the following table:
Summary of Estimated Expenses by 2011
($ millions)
----------------------------------------------------------------------
Accelerated depreciation $143
Employee separation 353
Other* 174
-------------------------------------
Total** $670
*Includes employee relocation costs and relocation of equipment and
installation costs, partially offset by estimated gains on sales of
land and buildings.
**Approximately 66% of the total expenses or $440 million will be paid
in cash. In addition, the program will entail capital expenditures of
approximately $230 million at PM USA and $50 million at PMI.
PMI is expected to shift sourcing of approximately 57 billion
cigarettes from Cabarrus to PMI facilities in Europe by the third
quarter of 2008, and PM USA will close its Cabarrus manufacturing
facility by the end of 2010. The Cabarrus facility currently employs
approximately 2,500 people. PM USA and PMI are significant purchasers
of U.S. leaf tobacco and will continue to purchase U.S. tobacco for
future production. Looking ahead, PM USA said that it plans to source
its production of cigarettes sold in the U.S. from its manufacturing
facility in Richmond.
"PM USA recognizes the profound impact the closing of the Cabarrus
cigarette manufacturing facility has on employees and their families.
As the company works to reduce manufacturing overcapacity, it will
address the adverse impact on employees by relocating as many as
possible to jobs in Richmond and offering separation benefits to those
it cannot relocate," said Mike Szymanczyk, chairman and chief
executive officer of PM USA. "It is my hope that the majority of
employees at Cabarrus will be able to relocate to Richmond."
As a result of increased production requirements at its operations
in Richmond, coupled with ongoing retirements of current
Richmond-based employees, PM USA expects to be able to offer positions
in Richmond to most North Carolina-based hourly employees and many
salaried employees. PM USA employees who are displaced by the changes
will be eligible for three to twenty months of severance pay and
benefits, depending on length of service, as well as job outplacement
counseling.
Altria Group, Inc. Profile
As of March 31, 2007, Altria Group, Inc. owned 100% of Philip
Morris International Inc., Philip Morris USA Inc. and Philip Morris
Capital Corporation, and approximately 28.6% of SABMiller plc. The
brand portfolio of Altria Group, Inc.'s tobacco operating companies
includes such well-known names as Marlboro, L&M, Parliament and
Virginia Slims. Altria Group, Inc. recorded 2006 net revenues
(ex-Kraft) from continuing operations of $67.1 billion.
Trademarks and service marks mentioned in this release are the
registered property of, or licensed by, the subsidiaries of Altria
Group, Inc.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and
other forward-looking statements that involve a number of risks and
uncertainties and are made pursuant to the Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995. The following
important factors could cause actual results and outcomes to differ
materially from those contained in such forward-looking statements.
Altria Group, Inc.'s tobacco subsidiaries (Philip Morris USA and
Philip Morris International) are subject to intense price competition;
changes in consumer preferences and demand for their products;
fluctuations in levels of customer inventories; the effects of foreign
economies and local economic and market conditions; unfavorable
currency movements and changes to income tax laws. Their results are
dependent upon their continued ability to promote brand equity
successfully; to anticipate and respond to new consumer trends; to
develop new products and markets and to broaden brand portfolios in
order to compete effectively with lower-priced products; and to
improve productivity.
Altria Group, Inc.'s tobacco subsidiaries continue to be subject
to litigation, including risks associated with adverse jury and
judicial determinations, and courts reaching conclusions at variance
with the company's understanding of applicable law and bonding
requirements in the limited number of jurisdictions that do not limit
the dollar amount of appeal bonds; legislation, including actual and
potential excise tax increases; discriminatory excise tax structures;
increasing marketing and regulatory restrictions; the effects of price
increases related to excise tax increases and concluded tobacco
litigation settlements on consumption rates and consumer preferences
within price segments; health concerns relating to the use of tobacco
products and exposure to environmental tobacco smoke; governmental
regulation; privately imposed smoking restrictions; and governmental
and grand jury investigations.
Altria Group, Inc. and its subsidiaries are subject to other risks
detailed from time to time in its publicly filed documents, including
its Quarterly Report on Form 10-Q for the period ended March 31, 2007.
Altria Group, Inc. cautions that the foregoing list of important
factors is not complete and does not undertake to update any
forward-looking statements that it may make.
CONTACT: Altria Group, Inc.
Nicholas M. Rolli, 917-663-3460
or
Timothy R. Kellogg, 917-663-2759
or
Philip Morris USA
Media Center
804-484-8897
or
Philip Morris International
Press Center
41 (58) 242-4500
SOURCE: Altria Group, Inc.
|
