Altria Raises View on $1B Tax Benefit

Altria Group Inc. (MO), majority owner of Kraft Foods (KFT) and maker of Marlboro cigarettes, on Thursday lifted its 2006 financial forecast to reflect a $1 billion tax-related benefit and the just-announced sale of the Milk-Bone brand.

Altria projected 2006 earnings between $5.25 to $5.35 per share, up from a previous range of $4.85 to $4.95 per share. The company owns the Philip Morris tobacco business and an 87 percent stake in Kraft, one of the world's biggest food makers.

The $1 billion non-cash benefit stems from the reversal of tax reserves after the Internal Revenue Service completed a review of Altria's tax returns from 1996 to 1999. Altria said it would record the benefit in this year's first quarter.

Altria will pay $337 million, plus $46 million in pretax interest, to Kraft for its share of the benefit, which will have no effect on Altria's consolidated cash flow, according to the company.

Altria said it agreed with all the IRS's findings, except for the disallowance of benefits related to certain leveraged lease transactions done byPhilip Morris Capital Corp., its aircraft leasing arm.

The company said it will contest about $170 million of tax and interest assessed on the disputed transactions.

Separately, Del Monte Foods Co., one of the nation's largest distributors of canned fruit and vegetables, said Thursday it agreed to acquire Milk-Bone dog treats and other brands from Kraft Foods Inc. for about $580 million.

Altria expects the sale to lower its earnings by about 5 cents per share.

Wall Street's average 2006 estimate for Altria is $5.28 per share, according to a Thomson Financial poll of 12 analysts.

In premarket trading, Altria shares rose 30 cents to $74.17 while Kraft Foods Inc. shares rose 21 cents to $30.14.