Case 1:20-cv-00393-LO-TCB Document 898-7 Filed 01/21/22 Page 1 of 4 PageID# 25235
`Case 1:20-cv-00393-LO-TCB Document 898-7 Filed 01/21/22 Page 1 of 4 PagelD# 25235
`
`EXHIBIT 7
`EXHIBIT 7
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 898-7 Filed 01/21/22 Page 2 of 4 PageID# 25236
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`FORM 10-K
`x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the fiscal year ended December 31, 2016
`OR
`¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the transition period from to
`Commission File Number 1-08940
`ALTRIA GROUP, INC.
`(Exact name of registrant as specified in its charter)
`
`Virginia
`(State or other jurisdiction of
`incorporation or organization)
`
`6601 West Broad Street, Richmond, Virginia
`(Address of principal executive offices)
`
`804-274-2200
`(Registrant’s telephone number, including area code)
`Securities registered pursuant to Section 12(b) of the Act:
`
`13-3260245
`(I.R.S. Employer
`Identification No.)
`
`23230
`(Zip Code)
`
` Title of each class
`
`Common Stock, $0.33 1 / 3 par value
`
`Name of each exchange on which registered
`
`New York Stock Exchange
`
`Securities registered pursuant to Section 12(g) of the Act: None
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ
`Yes ¨
`No
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨
`Yes þ
`No
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
`months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days þ
`Yes ¨
` No
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and
`posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
`submit and post such files) þ
`Yes ¨
`No
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to
`the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-
`K þ
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of
`“large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
` Large accelerated filer þ
` Accelerated filer ¨
`
` Non-accelerated filer ¨
` (Do not check if smaller reporting company) Smaller operating company ¨
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨
`Yes þ
`No
`As of June 30, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $135 billion based on
`the closing sale price of the common stock as reported on the New York Stock Exchange.
`Class
`
`Outstanding at February 13, 2017
`
`Common Stock, $0.33 1 / 3 par value
`DOCUMENTS INCORPORATED BY REFERENCE
`
`1,939,420,437 shares
`
`Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of shareholders to be held on May 18, 2017, to be filed with
`the Securities and Exchange Commission on or about April 6, 2017, are incorporated by reference into Part III hereof.
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 898-7 Filed 01/21/22 Page 3 of 4 PageID# 25237
`Table of Contents
`Altria Group, Inc. and Subsidiaries
`Notes to Consolidated Financial Statements
`_________________________
`
`2015. In June 2016, the U.S. Court of Appeals for the District of Columbia
`Circuit affirmed the dismissal of the case on jurisdictional grounds. In July
`2016, the relator filed a petition for rehearing or rehearing en
`banc
`. In
`September 2016, the U.S. Court of Appeals for the District of Columbia Circuit
`denied the petition for rehearing. Plaintiffs did not file a certiorari
`petition in
`the United States Supreme Court within the required time, and the case is thus
`concluded.
`Argentine Grower Cases: PM USA and Altria Group, Inc. were sued in
`▪
`six cases ( Hupan
`, Chalanuk
`, Rodriguez
`Da
`Silva
`, Aranda
`, Taborda
`and
`Biglia
`) filed in Delaware state court against multiple defendants by the parents
`of Argentine children born with alleged birth defects. Plaintiffs in these cases
`allege that they grew tobacco in Argentina under contract with Tabacos Norte
`S.A., an alleged subsidiary of PMI, and that they and their infant children were
`exposed directly and in
`utero
`to Monsanto Company’s (“Monsanto”) Roundup
`herbicide during the production and cultivation of tobacco. Plaintiffs seek
`compensatory and punitive damages against all defendants. Altria Group, Inc.
`and certain other defendants were dismissed from the Hupan
`, Chalanuk,
`Rodriguez
`Da
`Silva,
`Aranda
`, Taborda
`and Biglia
`cases .
`The three remaining
`defendants in the six cases were PM USA, Philip Morris Global Brands Inc. (a
`subsidiary of PMI) and Monsanto. Following discussions regarding
`indemnification for these cases pursuant to the Distribution Agreement between
`PMI and Altria Group, Inc., PMI and PM USA agreed to resolve conflicting
`indemnity demands after final judgments are entered. See Guarantees
`and
`Other
`Similar
`Matters
`below for a discussion of the Distribution Agreement. In
`April 2014, all three defendants in the Hupan
`case filed motions to dismiss for
`failure to state a claim, and PM USA and Philip Morris Global Brands filed
`separate motions to dismiss based on the doctrine of forum
`non
`conveniens
`. All
`proceedings in the other five cases were stayed pending the court’s resolution of
`the motions to dismiss filed in Hupan
`. In November 2015, the trial court
`granted PM USA’s motion to dismiss on forum
`non
`conveniens
`grounds.
`Plaintiffs filed a motion for clarification or re-argument in December 2015,
`which the court denied in August 2016. Later in August 2016, PM USA and
`Philip Morris Global Brands moved for entry of final judgment in the Hupan
`case and also moved to lift the stays in the other five cases for the limited
`purpose of entering final judgment of dismissal in those cases as well based on
`the forum
`non
`conveniens
`decision in Hupan
`. The court granted those motions
`in September 2016, and entered final judgment of dismissal in all six cases. In
`October 2016, plaintiffs filed their notice of appeal to the Delaware Supreme
`Court.
`UST Litigation
`Claims related to smokeless tobacco products generally fall within the
`following categories:
`First, UST and/or its tobacco subsidiaries have been named in certain
`actions in West Virginia (See In
`re:
`Tobacco
`Litigation
`above) brought by or on
`behalf of individual plaintiffs against cigarette manufacturers, smokeless
`tobacco manufacturers and other organizations seeking damages and other
`relief in connection with injuries allegedly sustained as a result of tobacco
`
`usage, including smokeless tobacco products. Included among the plaintiffs are
`three individuals alleging use of USSTC’s smokeless tobacco products and
`alleging the types of injuries claimed to be associated with the use of smokeless
`tobacco products. USSTC, along with other non-cigarette manufacturers, has
`remained severed from such proceedings since December 2001.
`Second, UST and/or its tobacco subsidiaries have been named in a number
`of other individual tobacco and health suits over time. Plaintiffs’ allegations of
`liability in these cases are based on various theories of recovery, such as
`negligence, strict liability, fraud, misrepresentation, design defect, failure to
`warn, breach of implied warranty, addiction and breach of consumer protection
`statutes. Plaintiffs seek various forms of relief, including compensatory and
`punitive damages, and certain equitable relief, including but not limited to
`disgorgement. Defenses raised in these cases include lack of causation,
`assumption of the risk, comparative fault and/or contributory negligence, and
`statutes of limitations. In July 2016, USSTC and Altria Group, Inc. were named
`as defendants, along with other named defendants, in one such case in
`California ( Gwynn
`). In August 2016, defendants removed the case to federal
`court. In September 2016, plaintiffs filed a motion to remand the case back to
`state court, which the court granted in January 2017.
`Nu Mark Patent Litigation
`In April 2016, Fontem Ventures B.V. and Fontem Holdings 1 B.V., both
`subsidiaries of ITG, sued Nu Mark for alleged patent infringement in the U.S.
`District Court for the Central District of California. The suit alleged that Nu
`Mark’s MarkTen
`, MarkTen
`XL and Green
`Smoke
`products infringe one or
`more claims under eight separate Fontem patents for e-vapor products. The suit
`sought recovery of an unspecified amount of money damages for alleged past
`infringement and an injunction against future infringement, which injunction
`may have resulted in Nu Mark being enjoined from marketing one or more of
`the products at issue in the suit. In June and July 2016, Nu Mark filed multiple
`inter
`partes
`review petitions with the U.S. Patent Trial and Appeal Board
`challenging the validity of all patents and claims asserted against it in the
`lawsuit on multiple grounds.
`In June 2016, the same Fontem entities filed a second lawsuit against Nu
`Mark in the U.S. District Court for the Central District of California asserting
`infringement of eight additional e-vapor patents that have issued since the filing
`of the first case in April 2016. The second case involved the same Nu Mark
`products as the first case, and likewise sought recovery of an unspecified
`amount of money damages for alleged past infringement and an injunction
`against future infringement. In June 2016, Nu Mark filed a motion to transfer
`venue of both lawsuits from California to the Middle District of North Carolina,
`which the court granted in August 2016. Between August and November 2016,
`Nu Mark filed multiple inter
`partes
`review petitions with the U.S. Patent Trial
`and Appeal Board challenging the validity of all patents and claims asserted
`against it in the second lawsuit. In December 2016, the parties entered into a
`settlement and license agreement, resulting in the dismissal of the litigation and
`termination of all
`
`98
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`

`

`Case 1:20-cv-00393-LO-TCB Document 898-7 Filed 01/21/22 Page 4 of 4 PageID# 25238
`Table of Contents
`Altria Group, Inc. and Subsidiaries
`Notes to Consolidated Financial Statements
`_________________________
`
`
`
`pending inter
`partes
`review proceedings. Under the terms of the agreement, in
`January 2017, Nu Mark made an upfront payment of $21 million and will make
`future royalty payments in amounts that Altria Group, Inc. does not expect to be
`material. In the fourth quarter of 2016, Nu Mark recorded a provision on its
`consolidated balance sheet of $21 million .
`Environmental Regulation
`Altria Group, Inc. and its subsidiaries (and former subsidiaries) are subject to
`various federal, state and local laws and regulations concerning the discharge of
`materials into the environment, or otherwise related to environmental
`protection, including, in the United States: the Clean Air Act, the Clean Water
`Act, the Resource Conservation and Recovery Act and the Comprehensive
`Environmental Response, Compensation and Liability Act (commonly known
`as “Superfund”), which can impose joint and several liability on each
`responsible party. Subsidiaries (and former subsidiaries) of Altria Group, Inc.
`are involved in several matters subjecting them to potential costs of remediation
`and natural resource damages under Superfund or other laws and regulations.
`Altria Group, Inc.’s subsidiaries expect to continue to make capital and other
`expenditures in connection with environmental laws and regulations.
`Altria Group, Inc. provides for expenses associated with environmental
`remediation obligations on an undiscounted basis when such amounts are
`probable and can be reasonably estimated. Such accruals are adjusted as new
`information develops or circumstances change. Other than those amounts, it is
`not possible to reasonably estimate the cost of any environmental remediation
`and compliance efforts that subsidiaries of Altria Group, Inc. may undertake in
`the future. In the opinion of management, however, compliance with
`environmental laws and regulations, including the payment of any remediation
`costs or damages and the making of related expenditures, has not had, and is not
`expected to have, a material adverse effect on Altria Group, Inc.’s consolidated
`results of operations, capital expenditures, financial position or cash flows.
`Guarantees and Other Similar Matters
`In the ordinary course of business, certain subsidiaries of Altria Group, Inc.
`have agreed to indemnify a limited number of third parties in the event of future
`litigation. At December 31, 2016 , Altria Group, Inc. and certain of its
`subsidiaries (i) had $59 million of unused letters of credit obtained in the
`ordinary course of business; (ii) were contingently liable for $25 million of
`guarantees, consisting primarily of surety bonds, related to their own
`performance; and (iii) had a redeemable noncontrolling interest of $38 million
`recorded on its consolidated balance sheet. In addition, from time to time,
`subsidiaries of Altria Group, Inc. issue lines of credit to affiliated entities.
`These items have not had, and are not expected to have, a significant impact on
`Altria Group, Inc.’s liquidity.
`Under the terms of a distribution agreement between Altria Group, Inc. and
`PMI (the “Distribution Agreement”), entered into as a result of Altria Group,
`Inc.’s 2008 spin-off of its former subsidiary PMI, liabilities concerning tobacco
`products will be
`
`allocated based in substantial part on the manufacturer. PMI will indemnify
`Altria Group, Inc. and PM USA for liabilities related to tobacco products
`manufactured by PMI or contract manufactured for PMI by PM USA, and PM
`USA will indemnify PMI for liabilities related to tobacco products
`manufactured by PM USA, excluding tobacco products contract manufactured
`for PMI. Altria Group, Inc. does not have a related liability recorded on its
`consolidated balance sheet at December 31, 2016 as the fair value of this
`indemnification is insignificant.
`As more fully discussed in Note 20 . Condensed
`Consolidating
`Financial
`Information
`, PM USA has issued guarantees relating to Altria Group, Inc.’s
`obligations under its outstanding debt securities, borrowings under the Credit
`Agreement and amounts outstanding under its commercial paper program.
`Redeemable Noncontrolling Interest
`In September 2007, Ste. Michelle completed the acquisition of Stag’s Leap
`Wine Cellars through one of its consolidated subsidiaries, Michelle-Antinori,
`LLC (“Michelle-Antinori”), in which Ste. Michelle holds an 85% ownership
`interest with a 15% noncontrolling interest held by Antinori California
`(“Antinori”). In connection with the acquisition of Stag’s Leap Wine Cellars,
`Ste. Michelle entered into a put arrangement with Antinori. The put
`arrangement, as later amended, provides Antinori with the right to require Ste.
`Michelle to purchase its 15% ownership interest in Michelle-Antinori at a price
`equal to Antinori’s initial investment of $27 million . The put arrangement
`became exercisable in September 2010 and has no expiration date. As of
`December 31, 2016, the redemption value of the put arrangement did not
`exceed the noncontrolling interest balance. Therefore, no adjustment to the
`value of the redeemable noncontrolling interest was recognized on the
`consolidated balance sheet for the put arrangement.
`The noncontrolling interest put arrangement is accounted for as
`mandatorily redeemable securities because redemption is outside of the control
`of Ste. Michelle. As such, the redeemable noncontrolling interest is reported in
`the mezzanine equity section on the consolidated balance sheets at December
`31, 2016 and 2015.
`Note 20 . Condensed Consolidating Financial Information
`PM USA, which is a 100% owned subsidiary of Altria Group, Inc., has
`guaranteed Altria Group, Inc.’s obligations under its outstanding debt securities,
`borrowings under its Credit Agreement and amounts outstanding under
`its commercial paper program (the “Guarantees”). Pursuant to the Guarantees,
`PM USA fully and unconditionally guarantees, as primary obligor, the payment
`and performance of Altria Group, Inc.’s obligations under the guaranteed debt
`instruments (the “Obligations”), subject to release under certain customary
`circumstances as noted below.
`The Guarantees provide that PM USA guarantees the punctual payment
`when due, whether at stated maturity, by acceleration or otherwise, of the
`Obligations. The liability of PM USA under the Guarantees is absolute and
`unconditional
`
`99
`
`