Altria Group, Inc. (Altria) (NYSE:MO) announces the expiration
of its previously announced cash tender offer for any and all of
its senior unsecured 9.95% Notes due 2038 (the “2038 Notes”) and
any and all of its senior unsecured 10.20% Notes due 2039 (the
“2039 Notes” and, together with the 2038 Notes, the “Notes”). The
terms and conditions of the tender offer are described in the Offer
to Purchase, dated September 13, 2016 and the related Letter of
Transmittal and Notice of Guaranteed Delivery.
The tender offer for the Notes expired at 5:00 p.m., New York
City time, on Monday, September 19, 2016 (the “Expiration
Time”).
According to information provided by Global Bondholder Services
Corporation, the Depositary and Information Agent for the tender
offer, $441,081,000 aggregate principal amount of the 2038 Notes
and $492,961,000 aggregate principal amount of the 2039 Notes were
validly tendered at or prior to the Expiration Time and not validly
withdrawn, which amounts include $1,187,000 aggregate principal
amount of the outstanding 2038 Notes that remain subject to
guaranteed delivery procedures and $1,165,000 aggregate principal
amount of the outstanding 2039 Notes that remain subject to
guaranteed delivery procedures.
Title of Securities
CUSIPNumber
OutstandingPrincipalAmount
PrincipalAmountTendered*
U.S.
TreasuryReferenceSecurity
U.S.
TreasuryReferenceYield
FixedSpread(bps)
TotalConsideration**
9.95%Notesdue 2038
02209SAE3
$682,321,000
$441,081,000
2.500% due5/15/2046
2.443%
167
$1,842.71
10.20%Notesdue 2039
02209SAH6 $717,708,000
$492,961,000
2.500% due5/15/2046
2.443%
167
$1,884.63
* Includes Notes subject to
guaranteed delivery procedures. ** Per $1,000 principal amount of
Notes accepted for purchase.
Altria expects to accept for purchase all Notes validly tendered
and not validly withdrawn at or prior to the Expiration Time. The
conditions to the tender offer having been satisfied, Altria,
therefore, expects the payment for the purchased Notes, including
Notes delivered in accordance with guaranteed delivery procedures,
to be made on September 22, 2016.
In addition, holders whose Notes are purchased in the tender
offer will be paid accrued and unpaid interest on their purchased
Notes from the last applicable interest payment date up to, but not
including, the payment date for such purchased Notes.
Deutsche Bank Securities Inc., Goldman, Sachs & Co.,
Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are
acting as the Dealer Managers for the tender offer. Investors with
questions may contact Deutsche Bank Securities Inc. at (866)
627-0391 (toll-free) or (212) 250-2955 (collect) and Goldman, Sachs
& Co. at (800) 828-3182 (toll-free) or (212) 357-1039
(collect). Global Bondholder Services Corporation is the
Information Agent and Depositary and can be contacted at the
following numbers: banks and brokers can call (212) 430-3774
(collect), and all others can call (866) 470-3900 (toll-free).
This press release is neither an offer to sell nor a
solicitation of offers to buy any securities. The tender offer was
made only pursuant to the Offer to Purchase and the related Letter
of Transmittal and Notice of Guaranteed Delivery. The tender offer
was not made to holders of Notes in any jurisdiction in which the
making or acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. Please
refer to the Offer to Purchase for a description of offer terms,
conditions, disclaimers and other information applicable to the
tender offer.
2016 Third Quarter Charge and 2016
Full-Year Earnings and Tax Rate Guidance
Based on the Total Consideration specified in the table above
and the amount of Notes validly tendered and expected to be
accepted for purchase, Altria will record a one-time, pre-tax
charge against reported earnings in the third quarter of 2016 of
approximately $825 million, or $0.28 per share, reflecting the loss
on early extinguishment of debt related to the tender offer (the
“Charge”).
Altria reaffirms its previously announced guidance for 2016
full-year adjusted diluted earnings per share (“EPS”), which
excludes the Charge and the special items for the first half of
2016 as shown in Schedule 1, to be in the range of $3.01 to $3.07,
representing a growth rate of 7.5% to 9.5% from an adjusted diluted
EPS base of $2.80 in 2015, as shown in Schedule 1. Altria expects
that its 2016 full-year effective tax rate on operations will
increase from approximately 35.3% to 35.4% due to a reduction in
certain consolidated tax benefits resulting from the tender offer.
This guidance does not include any impact from the anticipated
business combination between Anheuser-Busch InBev SA/NV (“AB
InBev”) and SABMiller plc (“SABMiller”), including effects from the
anticipated reporting lag described in Altria’s second quarter 2016
earnings press release, as the transaction remains subject to
certain approvals.
Altria’s full-year adjusted diluted EPS guidance and full-year
forecast for its effective tax rate on operations exclude the
impact of certain income and expense items that management believes
are not part of underlying operations. These items may include, for
example, loss on early extinguishment of debt, restructuring
charges, SABMiller special items, certain tax items, charges
associated with tobacco and health litigation items, and
settlements of, and determinations made in connection with, certain
non-participating manufacturer (“NPM”) adjustment disputes (such
settlements and determinations are referred to collectively as NPM
Adjustment Items).
Altria’s management cannot estimate on a forward-looking basis
the impact of certain income and expense items, including those
items noted in the preceding paragraph, on its reported diluted EPS
and its reported effective tax rate because these items, which
could be significant, are difficult to predict and may be highly
variable. As a result, Altria does not provide a corresponding U.S.
generally accepted accounting principles (GAAP) measure for, or
reconciliation to, its adjusted diluted EPS guidance or its
effective tax rate on operations forecast.
The factors described in the Forward-Looking and Cautionary
Statements section of this release represent continuing risks to
this forecast.
Altria’s Profile
Altria’s wholly-owned subsidiaries include Philip Morris USA
Inc., U.S. Smokeless Tobacco Company LLC, John Middleton Co., Nu
Mark LLC, Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”) and
Philip Morris Capital Corporation. Altria holds a continuing
economic and voting interest in SABMiller.
The brand portfolios of Altria’s tobacco operating companies
include Marlboro®, Black & Mild®, Copenhagen®, Skoal®, MarkTen®
and Green Smoke®. Ste. Michelle produces and markets premium wines
sold under various labels, including Chateau Ste. Michelle®,
Columbia Crest®, 14 Hands® and Stag’s Leap Wine Cellars™, and it
imports and markets Antinori®, Champagne Nicolas Feuillatte™,
Torres® and Villa Maria Estate™ products in the United States.
Trademarks and service marks related to Altria referenced in this
release are the property of Altria or its subsidiaries or are used
with permission. More information about Altria is available at
altria.com and on the Altria Investor app.
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.
Important factors that may cause actual results and outcomes to
differ materially from those contained in the projections and
forward-looking statements included in this press release are
described in Altria’s publicly filed reports, including its Annual
Report on Form 10-K for the year ended December 31, 2015 and its
Quarterly Report on Form 10-Q for the period ended June 30,
2016.
These factors include the following: significant competition;
changes in adult consumer preferences and demand for Altria’s
operating companies’ products; fluctuations in raw material
availability, quality and price; reliance on key facilities and
suppliers; reliance on critical information systems, many of which
are managed by third-party service providers; fluctuations in
levels of customer inventories; the effects of global, national and
local economic and market conditions; changes to income tax laws;
federal, state and local legislative activity, including actual and
potential federal and state excise tax increases; increasing
marketing and regulatory restrictions; the effects of price
increases related to excise tax increases and concluded tobacco
litigation settlements on trade inventories, consumption rates and
consumer preferences within price segments; health concerns
relating to the use of tobacco products and exposure to
environmental tobacco smoke; privately imposed smoking
restrictions; and, from time to time, governmental
investigations.
Furthermore, the results of Altria’s tobacco businesses are
dependent upon their continued ability to promote brand equity
successfully; to anticipate and respond to evolving adult consumer
preferences; to develop, manufacture, market and distribute
products that appeal to adult tobacco consumers (including, where
appropriate, through arrangements with, and investments in, third
parties); to improve productivity; and to protect or enhance
margins through cost savings and price increases.
Altria and its tobacco businesses are also subject to federal,
state and local government regulation, including broad-based
regulation by the U.S. Food and Drug Administration. Altria and its
subsidiaries continue to be subject to litigation, including risks
associated with adverse jury and judicial determinations, courts
reaching conclusions at variance with the companies’ understanding
of applicable law, bonding requirements in the limited number of
jurisdictions that do not limit the dollar amount of appeal bonds
and certain challenges to bond cap statutes.
In addition, the factors related to AB InBev’s proposed
transaction to effect a business combination with SABMiller include
the following: the risk that one or more conditions to closing the
proposed transaction may not be satisfied; the risk that a
shareholder or regulatory approval required for the proposed
transaction is not obtained or is obtained subject to conditions
that are not anticipated; AB InBev’s inability to achieve the
contemplated synergies and value creation from the proposed
transaction; the fact that Altria’s election to receive transaction
consideration in the form of equity is subject to proration, which
may result in a reduced percentage ownership of the combined
company, additional tax liabilities and/or changes in Altria’s
ability to account for its interest in the combined company under
the equity method of accounting; the fact that the equity
securities to be received by Altria as transaction consideration
will be subject to restrictions on transfer lasting five years from
completion of the proposed transaction; the risk that AB InBev’s
share price, which affects the value of Altria’s transaction
consideration, will fluctuate based on a variety of factors that
are beyond Altria’s control; the fact that the strengthening of the
U.S. dollar against the British pound would adversely affect
Altria’s cash consideration as the British pound would translate
into fewer U.S. dollars; the risk that the tax treatment of
Altria’s transaction consideration is not guaranteed; and that the
tax treatment of the dividends Altria receives from the new company
may not be as favorable as dividends from SABMiller.
Altria 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 except as required by applicable law.
All subsequent written and oral forward-looking statements
attributable to Altria or any person acting on its behalf are
expressly qualified in their entirety by the cautionary statements
referenced above.
ALTRIA GROUP, INC.
and Subsidiaries
2016 First Six Months Special Items and
Reconciliation of 2015 Adjusted Results
Altria’s 2016 First Six Months Special Items NPM
Adjustment Items $ 0.01 Tobacco and health litigation
items 0.01 SABMiller special items 0.06 Asset impairment, exit and
implementation costs 0.04 Gain on derivative financial instrument
(0.05) Tax items (0.01)
$ 0.06
Reconciliation of Altria’s 2015 Adjusted
Results Full Year 2015 Reported diluted
EPS $ 2.67 NPM Adjustment Items (0.03) Tobacco
and health litigation items 0.05 SABMiller special items 0.04 Loss
on early extinguishment of debt 0.07
Adjusted diluted
EPS $ 2.80
Altria reports its financial results in accordance with GAAP.
Altria’s management reviews certain financial results, including
diluted EPS, on an adjusted basis, which excludes certain income
and expense items, including those items noted under “2016 Third
Quarter Charge and 2016 Full-Year Earnings and Tax Rate Guidance”
above. Altria’s management does not view any of these special items
to be part of Altria’s sustainable results as they may be highly
variable, are difficult to predict and can distort underlying
business trends and results. Altria’s management also reviews
income tax rates on an adjusted basis. Altria’s effective tax rate
on operations may exclude certain tax items from its reported
effective tax rate. Altria’s management believes that adjusted
financial measures provide useful insight into underlying business
trends and results and provide a more meaningful comparison of
year-over-year results. Altria’s management uses adjusted financial
measures for planning, forecasting and evaluating business and
financial performance, including allocating resources and
evaluating results relative to employee compensation targets. These
adjusted financial measures are not consistent with GAAP and may
not be calculated the same as similarly titled measures used by
other companies. These adjusted financial measures should thus be
considered as supplemental in nature and not considered in
isolation or as a substitute for the related financial information
prepared in accordance with GAAP.
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