Altria Group, Inc. (Altria) (NYSE:MO) today announced its 2018
first-quarter business results and reaffirmed its guidance for 2018
full-year adjusted diluted earnings per share (EPS).
“Altria is off to a fast start to the strong year of EPS growth
to which we’ve guided, with adjusted diluted EPS growth of 30.1% in
the first quarter of 2018,” said Marty Barrington, Altria’s
Chairman, Chief Executive Officer and President. “In addition,
Altria continued to reward shareholders by paying out nearly $1.3
billion in dividends, announcing an out-of-cycle dividend increase
of 6.1% and repurchasing approximately $513 million in shares.
Within the reporting segments, income performance reflects the
timing of previously announced investments for the long-term
strength of the business.”
“We continue to expect full year adjusted diluted EPS growth of
15% to 19%.”
As previously announced, a conference call with the investment
community and news media will be webcast on April 26, 2018 at 9:00
a.m. Eastern Time. Access to the webcast is available at
www.altria.com/webcasts and via the Altria Investor app.
Altria Headline Financials1
($ in millions, except per share data)
Q1 2018
Change vs.
Q1 2017
Net revenues $6,108
0.4% Revenues net of
excise taxes $4,670
1.8% Tax rate:
Reported tax rate 23.2%
(9.8)
pp Adjusted tax rate 23.2%
(12.5) pp Per
share data: Reported diluted EPS
$1.00
38.9% Adjusted diluted EPS $0.95
30.1%
1 “Adjusted” financial measures presented in this release
exclude the impact of special items. See “Basis of Presentation”
for more information.
Cash Returns to Shareholders
Dividends:
- Altria paid nearly $1.3 billion in
dividends in the first quarter.
- In March 2018, Altria’s Board of
Directors (Board) increased the regular quarterly dividend by 6.1%
to $0.70 per share to reflect final 2017 financial results.
Altria’s current annualized dividend rate is $2.80 per share,
representing an annualized dividend yield of 4.9% as of April 20,
2018.
- Altria expects to maintain a dividend
payout ratio target of approximately 80% of adjusted diluted EPS.
Future dividend payments remain subject to the discretion of the
Board.
Share Repurchase Program:
- Altria repurchased eight million shares
in the first quarter at an average price of $64.33, for a cost of
$513 million.
- As of March 31, 2018, Altria had
approximately $505 million remaining in the current $1 billion
share repurchase program, which Altria expects to complete by the
end of 2018. The timing of share repurchases depends upon
marketplace conditions and other factors, and this program remains
subject to the discretion of the Board.
Innovation
In pursuit of Altria’s aspiration to be the U.S. leader in
authorized, non-combustible, reduced-risk products:
- USSTC submitted a modified risk tobacco
product application (MRTPA) to the U.S. Food and Drug
Administration (FDA) for Copenhagen Snuff Fine Cut.
- Nu Mark grew e-vapor volume by
approximately 30% and expanded MarkTen Elite, a pod-based closed
system product, to over 6,000 retail stores.
- PM USA participated in Philip Morris
International Inc.’s presentation to the FDA’s Tobacco Products
Scientific Advisory Committee about the IQOS MRTPA.
- PM USA’s initial lead market plans for
IQOS are ready to deploy upon FDA authorization.
Other Notable Events
Facilities Consolidation
- In the first quarter, Altria completed
its previously-announced facilities consolidation, which is
expected to deliver approximately $50 million in annualized cost
savings by the end of 2018.
- Altria recorded total pre-tax charges
of approximately $150 million, or $0.05 per share, of which $3
million was recorded in the first quarter of 2018.
2018 Full-Year Guidance
Altria reaffirms its guidance for 2018 full-year adjusted
diluted EPS to be in a range of $3.90 to $4.03, representing a
growth rate of 15% to 19% from an adjusted diluted EPS base of
$3.39 in 2017 as shown in Schedule 6. This guidance range excludes
the special items for the first quarter of 2018 shown in Table 1
and an additional $0.07 of tax expense resulting from the Tax Cuts
and Jobs Act (Tax Reform Act). This tax expense is related to a tax
basis adjustment to Altria’s AB InBev investment. Altria’s 2018
guidance reflects investments in focus areas for long-term growth,
including innovative product development and launches, regulatory
science, brand equity, retail fixtures and future retail
concepts.
Altria expects its 2018 full-year adjusted effective tax rate
will be in a range of approximately 23% to 24%.
Altria’s full-year adjusted diluted EPS guidance and full-year
forecast for its adjusted effective tax rate 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, gain/loss on AB InBev/SABMiller business combination, AB
InBev special items, certain tax items, charges associated with
tobacco and health litigation items, and resolutions of certain
non-participating manufacturer (NPM) adjustment disputes under the
Master Settlement Agreement (such dispute resolutions are referred
to 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, may be infrequent, 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 adjusted effective tax rate forecast.
The factors described in the “Forward-Looking and Cautionary
Statements” section of this release represent continuing risks to
Altria’s forecast.
ALTRIA GROUP, INC.
See "Basis of Presentation" for an explanation of financial
measures and reporting segments discussed in this release. Altria
uses the equity method of accounting for its investment in AB InBev
and reports its share of AB InBev’s results using a one-quarter
lag.
Financial Performance
- Net revenues grew 0.4% to $6.1 billion,
as higher net revenues in the smokeless products segment were
mostly offset by lower net revenues in the smokeable products
segment. Revenues net of excise taxes grew 1.8% to nearly $4.7
billion.
- Reported diluted EPS increased 38.9% to
$1.00, primarily driven by lower income taxes, higher reported
equity earnings from AB InBev (which included AB InBev special
items), higher reported operating companies income (OCI) in the
smokeless products segment and fewer shares outstanding.
- Adjusted diluted EPS increased 30.1% to
$0.95, primarily driven by lower income taxes, higher adjusted
equity earnings from AB InBev, higher adjusted OCI in the smokeless
products segment and fewer shares outstanding, partially offset by
lower adjusted OCI in the smokeable products segment.
Table 1 - Altria’s Adjusted Results
First Quarter 2018
2017 Change Reported diluted EPS
$ 1.00 $ 0.72 38.9
% NPM Adjustment Items (0.03 ) — Asset impairment, exit and
implementation costs — 0.01 Tobacco and health litigation items
0.01 — AB InBev special items (0.04 ) 0.03 Loss on AB
InBev/SABMiller business combination 0.01 — Tax items —
(0.03 )
Adjusted diluted EPS $
0.95 $ 0.73
30.1 %
Note: For details of pre-tax, tax and after-tax amounts, see
Schedule 5.
Special Items
The EPS impact of the following special items is shown in Table
1 and Schedule 5.
NPM Adjustment Items
- In the first quarter of 2018, Altria
recorded pre-tax income of $68 million (or $0.03 per share) for an
NPM adjustment settlement with nine states.
AB InBev Special Items
- In the first quarter of 2018, equity
earnings from AB InBev included net pre-tax income of $117 million
(or $0.04 per share), consisting primarily of Altria’s share of AB
InBev’s estimated effect of the Tax Reform Act, partially offset by
Altria’s share of AB InBev’s mark-to-market losses on AB InBev’s
derivative financial instruments used to hedge certain share
commitments. In the first quarter of 2017, equity earnings from AB
InBev included net pre-tax charges of $73 million (or $0.03 per
share), consisting primarily of Altria’s share of AB InBev’s
mark-to-market losses on AB InBev’s derivative financial
instruments used to hedge certain share commitments.
SMOKEABLE PRODUCTS
Revenues and OCI
- Net revenues declined 0.8% as lower
volume and higher promotional investments were mostly offset by
higher pricing. Revenues net of excise taxes grew 0.4%.
- Reported OCI increased 0.1%, as higher
pricing and NPM Adjustment Items were offset by lower volume,
investments in strategic initiatives and higher resolution
expenses.
- Adjusted OCI declined 2.0%, primarily
driven by cigarette volume declines, strategic business investments
and higher resolution expenses, partially offset by higher pricing.
Adjusted OCI margins declined 1.2 percentage points to 49.7%.
Table 2 - Smokeable Products: Revenues and OCI ($ in
millions) First
Quarter 2018 2017 Change
Net revenues $ 5,414 $
5,458
(0.8
)%
Excise taxes (1,401 ) (1,460 )
Revenues net of
excise taxes $ 4,013 $
3,998
0.4
%
Reported OCI $ 2,038 $ 2,036
0.1
%
NPM Adjustment Items (68 ) (8 ) Asset impairment, exit and
implementation costs 1 6 Tobacco and health litigation items 24
1
Adjusted OCI $
1,995 $ 2,035
(2.0
)%
Adjusted OCI margins 1 49.7 %
50.9
%
(1.2 ) pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
Shipment Volume
- Smokeable products segment reported
domestic cigarette shipment volume declined 4.2%, primarily driven
by the industry’s rate of decline and retail share declines,
partially offset by trade inventory movements.
- When adjusted for trade inventory
movements, smokeable products segment domestic cigarette shipment
volume decreased by an estimated 7%.
- Total domestic cigarette industry
volumes declined by an estimated 5.5%.
- Reported cigar shipment volume
increased 3.0%.
Table 3 - Smokeable Products: Shipment Volume (sticks in
millions) First Quarter 2018
2017 Change Cigarettes: Marlboro 23,653
24,695 (4.2 )%
Other premium 1,409 1,450 (2.8 )%
Discount 2,460 2,582 (4.7 )%
Total
cigarettes 27,522 28,727
(4.2 )% Cigars: Black & Mild
375 363 3.3 %
Other 3 4 (25.0 )%
Total
cigars 378 367 3.0 %
Total smokeable products 27,900
29,094 (4.1 )%
Note: Cigarettes volume includes units sold as well as
promotional units, but excludes units sold for distribution to
Puerto Rico, and units sold in U.S. Territories, to overseas
military and by Philip Morris Duty Free Inc., none of which,
individually or in the aggregate, is material to the smokeable
products segment.
Retail Share and Brand Activity
IRI refreshed its cigarette database in the first quarter of
2018, which affected previously released retail share results.
Restated share results are summarized below and in Schedule 8.
- Marlboro retail share declined 0.5
share points to 43.2%, driven in part by continued effects from the
April 2017 California state excise tax increase. Marlboro retail
share grew 0.1 share point sequentially.
- Smokeable products segment total
cigarette retail share declined 0.7 share points to 50.3%, and
declined 0.1 share point sequentially.
- PM USA expanded Marlboro Ice
nationally.
- Nat Sherman announced plans to expand
Nat’s into 13 additional states across the western U.S. starting in
June.
Table 4 - Smokeable Products: Cigarettes Retail Share
(percent) First Quarter
2018 2017
Percentagepoint change
Cigarettes: Marlboro 43.2 % 43.7 % (0.5 )
Other premium 2.6 2.7 (0.1 )
Discount 4.5 4.6
(0.1 )
Total cigarettes 50.3 %
51.0 % (0.7 )
Note: Retail share results for cigarettes are based on data from
IRI/MSAi, a tracking service that uses a sample of stores and
certain wholesale shipments to project market share and depict
share trends. This service tracks sales in the food, drug, mass
merchandisers, convenience, military, dollar store and club trade
classes. For other trade classes selling cigarettes, retail share
is based on shipments from wholesalers to retailers (STARS). This
service is not designed to capture sales through other channels,
including the internet, direct mail and some illicitly
tax-advantaged outlets. It is IRI’s standard practice to
periodically refresh its services, which could restate retail share
results that were previously released in this service.
SMOKELESS PRODUCTS
Revenues and OCI
- Net revenues increased 12.7%, primarily
driven by the impact of the 2017 voluntary recall and higher
pricing. Revenues net of excise taxes increased 13.1%.
- Reported OCI increased 37.4%, primarily
driven by the impact of the 2017 voluntary recall and higher
pricing.
- Adjusted OCI increased 27.3%, driven by
the same factors, and adjusted OCI margins increased 7.8 percentage
points to 69.0%.
Table 5 - Smokeless Products: Revenues and OCI ($ in
millions) First
Quarter 2018 2017 Change Net
revenues $ 525 $ 466
12.7% Excise taxes (32 ) (30 )
Revenues net of
excise taxes $ 493 $
436 13.1% Reported OCI $
338 $ 246 37.4% Asset impairment, exit
and implementation costs 2 21
Adjusted
OCI $ 340 $ 267
27.3% Adjusted OCI margins 1
69.0 % 61.2 % 7.8 pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
Shipment Volume
- Smokeless products segment reported
domestic shipment volume declined 0.1%. Adjusted shipment volume
comparisons are not provided due to the unusual effects of the 2017
recall.
- The smokeless industry volume declined
an estimated 1% over the past six months.
Table 6 - Smokeless Products: Shipment Volume (cans and packs in
millions) First
Quarter 2018 2017 Change
Copenhagen 124.4 124.5 (0.1)%
Skoal 55.0 55.6
(1.1)%
Copenhagen and Skoal
179.4 180.1 (0.4)% Other 16.3
15.7 3.8%
Total smokeless products
195.7 195.8 (0.1)%
Note: Volume includes cans and packs sold, as well as
promotional units, but excludes international volume, which is not
material to the smokeless products segment. New types of smokeless
products, as well as new packaging configurations of existing
smokeless products, may or may not be equivalent to existing moist
smokeless tobacco (MST) products on a can-for-can basis. To
calculate volumes of cans and packs shipped, one pack of snus,
irrespective of the number of pouches in the pack, is assumed to be
equivalent to one can of MST.
Retail Share and Brand Activity
IRI refreshed its smokeless products database in the first
quarter of 2018, which affected previously released retail share
results. Restated share results are summarized below and in
Schedule 8.
- Copenhagen retail share grew 1.1 share
points to 34.3% and Skoal retail share declined 1.2 share points to
16.2%.
- Copenhagen and Skoal combined retail
share decreased 0.1 share point to 50.5%.
- Smokeless products segment total retail
share grew 0.1 share point to 53.8%.
- USSTC expanded Copenhagen Southern
Blend into 13 states across the western U.S.
Table 7 - Smokeless Products: Retail Share (percent)
First Quarter 2018
2017
Percentagepoint change
Copenhagen 34.3 % 33.2 % 1.1
Skoal 16.2 17.4
(1.2 )
Copenhagen and Skoal 50.5
50.6 (0.1 ) Other 3.3 3.1
0.2
Total smokeless products 53.8
% 53.7 % 0.1
Note: Retail share results for smokeless products are based on
data from IRI InfoScan, a tracking service that uses a sample of
stores to project market share and depict share trends. This
service tracks sales in the food, drug, mass merchandisers,
convenience, military, dollar store and club trade classes on the
number of cans and packs sold. Smokeless products is defined by IRI
as moist smokeless and spit-free tobacco products. New types of
smokeless products, as well as new packaging configurations of
existing smokeless products, may or may not be equivalent to
existing MST products on a can-for-can basis. For example, one pack
of snus, irrespective of the number of pouches in the pack, is
assumed to be equivalent to one can of MST. Because this service
represents retail share performance only in key trade channels, it
should not be considered a precise measurement of actual retail
share. It is IRI’s standard practice to periodically refresh its
InfoScan services, which could restate retail share results that
were previously released in this service.
WINE
- Net revenues increased 1.4% primarily
driven by higher shipment volume, partially offset by unfavorable
mix.
- Reported and adjusted OCI declined
19.0%, primarily driven by one-time employee bonuses, partially
offset by higher net revenues.
- Reported wine shipment volume grew 6.1%
to approximately 1.8 million cases.
Table 8 - Wine: Revenues and OCI ($ in millions)
First Quarter 2018
2017 Change Net revenues
$ 142 $ 140
1.4
%
Excise taxes (5 ) (4 )
Revenues net of excise taxes
$ 137 $ 136
0.7
%
Reported and Adjusted OCI $
17 $ 21
(19.0
)%
OCI margins 1 12.4 % 15.4
% (3.0 ) pp
1 OCI margins are calculated as OCI divided by revenues net of
excise taxes.
Altria's Profile
Altria’s wholly-owned subsidiaries include Philip Morris USA
Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC), John
Middleton Co. (Middleton), Sherman Group Holdings, LLC and its
subsidiaries (Nat Sherman), Nu Mark LLC (Nu Mark), Ste. Michelle
Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital
Corporation (PMCC). Altria holds an equity investment in
Anheuser-Busch InBev SA/NV (AB InBev).
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.
Basis of Presentation
Altria reports its financial results in accordance with GAAP.
Altria’s management reviews OCI, which is defined as operating
income before general corporate expenses and amortization of
intangibles, to evaluate the performance of, and allocate resources
to, the segments. Altria’s management also reviews OCI, OCI margins
and diluted EPS on an adjusted basis, which excludes certain income
and expense items, including those items noted under “2018
Full-Year Guidance.” Altria’s management does not view any of these
special items to be part of Altria’s underlying results as they may
be highly variable, may be infrequent, 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 adjusted effective tax rate may exclude certain tax items
from its reported effective tax rate. Altria’s management believes
that adjusted financial measures provide useful additional 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.
Reconciliations of historical adjusted financial measures to
corresponding GAAP measures are provided in this release.
Altria uses the equity method of accounting for its investment
in AB InBev and reports its share of AB InBev’s results using a
one-quarter lag because AB InBev’s results are not available in
time to record them in the concurrent period. The one-quarter
reporting lag does not affect Altria’s cash flows.
Altria’s reportable segments are smokeable products, including
combustible cigarettes and cigars manufactured and sold by PM USA,
Middleton and Nat Sherman; smokeless products, including moist
smokeless tobacco and snus products manufactured and sold by USSTC;
and wine, produced and/or distributed by Ste. Michelle. Results for
innovative tobacco products (including Nu Mark’s e-vapor products,
Verve and IQOS) and PMCC are included in “All Other.”
Comparisons are to the corresponding prior-year period unless
otherwise stated.
Forward-Looking and Cautionary Statements
This 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, 2017. 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, 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 by the FDA. 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 Altria’s investment in AB
InBev include the following: the risk that Altria’s equity
securities in AB InBev are subject to restrictions on transfer
until October 10, 2021; the risk that Altria’s reported earnings
from and carrying value of its equity investment in AB InBev and
the dividends paid by AB InBev on shares owned by Altria may be
adversely affected by unfavorable foreign currency exchange rates
and other factors, including the risks encountered by AB InBev in
its business; the risk that the tax treatment of Altria’s
transaction consideration from the AB InBev/SABMiller business
combination and the accounting treatment of its equity investment
are not guaranteed; and the risk that the tax treatment of Altria’s
investment in AB InBev may not be as favorable as Altria
anticipates.
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.
Schedule 1
ALTRIA GROUP, INC.and
SubsidiariesConsolidated Statements of EarningsFor the Quarters
Ended March 31,(dollars in millions, except per share
data)(Unaudited)
2018 2017 % Change Net
revenues $ 6,108 $ 6,083
0.4% Cost of sales 1 1,734 1,813 Excise taxes on products 1
1,438 1,494 Gross profit 2,936 2,776 5.8% Marketing,
administration and research costs 567 482 Asset impairment and exit
costs 2 4
Operating companies income
2,367 2,290 3.4% Amortization of intangibles 5
5 General corporate expenses 46 46
Operating
income 2,316 2,239 3.4% Interest and other
debt expense, net 166 179 Net periodic benefit income, excluding
service cost (7 ) (8 ) Earnings from equity investment in AB InBev
(342 ) (23 ) Loss on AB InBev/SABMiller business combination 33
— Earnings before income taxes 2,466 2,091 17.9%
Provision for income taxes 571 689
Net
earnings 1,895 1,402 35.2% Net earnings
attributable to noncontrolling interests (1 ) (1 )
Net earnings
attributable to Altria Group, Inc. $ 1,894
$ 1,401 35.2% Per share
data:
Basic and diluted earnings per share
attributable to Altria Group, Inc.
$ 1.00 $ 0.72 38.9%
Weighted-average diluted shares outstanding 1,899 1,939 (2.1)%
1 Cost of sales includes charges for resolution expenses
related to state settlement agreements and FDA user fees.
Supplemental information concerning those items and excise taxes on
products sold is shown in Schedule 3.
Note: As a result of the January 1, 2018
adoption of Accounting Standards Update (“ASU”) No. 2017-07,
Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost (“ASU No. 2017-07”), certain immaterial
prior-year amounts have been reclassified to conform with the
current period’s presentation.
Schedule 2 ALTRIA GROUP, INC.and SubsidiariesSelected
Financial DataFor the Quarters Ended March 31,(dollars in
millions)(Unaudited)
Net
Revenues
SmokeableProducts
SmokelessProducts
Wine All Other Total 2018 $ 5,414 $ 525 $ 142
$ 27 $ 6,108 2017 5,458 466 140 19 6,083 % Change (0.8 )% 12.7 %
1.4 % 42.1 % 0.4 %
Reconciliation:
For the quarter ended March 31, 2017 $ 5,458
$ 466 $ 140 $ 19 $
6,083 Operations (44 ) 59 2 8 25
For the quarter ended March 31, 2018 $ 5,414
$ 525 $ 142
$ 27 $ 6,108
Operating Companies Income
(Loss)
SmokeableProducts
SmokelessProducts
Wine All Other Total 2018 $ 2,038 $ 338 $ 17 $
(26 ) $ 2,367 2017 2,036 246 21 (13 ) 2,290 % Change 0.1 % 37.4 %
(19.0 )% (100.0 )% 3.4 %
Reconciliation:
For the quarter ended March 31, 2017 $ 2,036
$ 246 $ 21 $ (13 )
$ 2,290 NPM Adjustment Items - 2017 (8 ) — — —
(8 ) Asset impairment, exit and implementation
costs - 2017
6 21 — — 27 Tobacco and health litigation items - 2017 1 —
— — 1 (1 ) 21 — —
20 NPM Adjustment Items - 2018 68 — — — 68 Asset
impairment, exit and implementation
costs - 2018
(1 ) (2 ) — — (3 ) Tobacco and health litigation items - 2018 (24 )
— — — (24 ) 43 (2 ) — —
41 Operations (40 ) 73 (4 ) (13 ) 16
For
the quarter ended March 31, 2018 $ 2,038
$ 338 $ 17 $
(26 ) $ 2,367 Note: As a
result of the January 1, 2018 adoption of ASU No. 2017-07, certain
immaterial prior-year operating companies income (loss) amounts
have been reclassified to conform with the current period’s
presentation. Schedule 3 ALTRIA GROUP, INC.and
SubsidiariesSupplemental Financial Data(dollars in
millions)(Unaudited)
For the Quarters Ended March
31, 2018 2017 The segment detail of excise
taxes on products sold is as follows: Smokeable products
$ 1,401 $ 1,460 Smokeless products 32 30 Wine 5 4 $ 1,438
$ 1,494
The segment detail of charges for
resolution expenses related to state settlement agreements included
in cost of sales is as follows: Smokeable products $
1,017 $ 1,080 Smokeless products 2 2 $ 1,019 $ 1,082
The segment detail of FDA user fees included in
cost of sales is
as follows:
Smokeable products $ 69 $ 68 Smokeless products 1 1 $
70 $ 69 Schedule 4 ALTRIA GROUP, INC.and
SubsidiariesNet Earnings and Diluted Earnings Per Share -
Attributable to Altria Group, Inc.For the Quarters Ended March
31,(dollars in millions, except per share data)(Unaudited)
Net Earnings Diluted
EPS 2018 Net Earnings $ 1,894
$ 1.00 2017 Net Earnings $ 1,401
$ 0.72 % Change 35.2 %
38.9 %
Reconciliation:
2017 Net Earnings $ 1,401 $ 0.72
2017 NPM Adjustment Items (1 ) — 2017 Tobacco and health
litigation items 1 — 2017 AB InBev special items 48 0.03 2017 Asset
impairment, exit, implementation and acquisition-related costs 19
0.01 2017 Tax items (58 ) (0.03 ) Subtotal 2017 special items 9
0.01 2018 NPM Adjustment Items 51 0.03 2018 AB
InBev special items 92 0.04 2018 Asset impairment, exit and
implementation costs (2 ) — 2018 Tobacco and health litigation
items (20 ) (0.01 ) 2018 Loss on AB InBev/SABMiller business
combination (26 ) (0.01 ) 2018 Tax items (1 ) — Subtotal
2018 special items 94 0.05 Fewer shares
outstanding — 0.02 Change in tax rate 293 0.15 Operations 97
0.05
2018 Net Earnings $ 1,894
$ 1.00 Schedule 5 ALTRIA
GROUP, INC.and SubsidiariesReconciliation of GAAP and non-GAAP
MeasuresFor the Quarters Ended March 31,(dollars in millions,
except per share data)(Unaudited)
EarningsbeforeIncomeTaxes
Provisionfor
IncomeTaxes
NetEarnings
Net EarningsAttributable
toAltria Group, Inc.
Diluted EPS
2018 Reported $ 2,466 $
571 $ 1,895 $
1,894 $ 1.00 NPM Adjustment
Items (68 ) (17 ) (51 ) (51 ) (0.03 ) AB InBev special items (117 )
(25 ) (92 ) (92 ) (0.04 ) Asset impairment, exit and implementation
costs 3 1 2 2 — Tobacco and health litigation items 28 8 20 20 0.01
Loss on AB InBev/SABMiller business
combination
33 7 26 26 0.01 Tax items — (1 ) 1
1 —
2018 Adjusted for Special
Items $ 2,345 $
544 $ 1,801
$ 1,800 $
0.95 2017 Reported $
2,091 $ 689 $ 1,402 $
1,401 $ 0.72 NPM Adjustment Items (1 ) — (1 )
(1 ) — Tobacco and health litigation items 1 — 1 1 — AB InBev
special items 73 25 48 48 0.03 Asset impairment, exit,
implementation andacquisition-related costs 30 11 19 19 0.01 Tax
items — 58 (58 ) (58 ) (0.03 )
2017 Adjusted for
Special Items $ 2,194 $
783 $ 1,411
$ 1,410 $
0.73 2018 Reported Net Earnings
$ 1,894 $ 1.00 2017 Reported Net
Earnings $ 1,401 $ 0.72 %
Change 35.2 % 38.9 % 2018
Net Earnings Adjusted for Special Items $ 1,800
$ 0.95 2017 Net Earnings Adjusted for Special
Items $ 1,410 $ 0.73 %
Change 27.7 % 30.1 %
Schedule 6 ALTRIA GROUP, INC.and SubsidiariesReconciliation of GAAP
and non-GAAP MeasuresFor the Year Ended December 31, 2017(dollars
in millions, except per share data)(Unaudited)
EarningsbeforeIncomeTaxes
(Benefit)Provisionfor
IncomeTaxes
NetEarnings
Net EarningsAttributable
toAltria Group, Inc.
Diluted EPS
2017 Reported $ 9,828 $ (399
) $ 10,227 $ 10,222
$ 5.31 NPM Adjustment Items 4 2 2 2 — Tobacco and
health litigation items 80 30 50 50 0.03 AB InBev special items 160
55 105 105 0.05 Asset impairment, exit, implementation and
acquisition-related costs
89 34 55 55 0.03 Gain on AB InBev/SABMiller business
combination
(445 ) (156 ) (289 ) (289 ) (0.15 ) Settlement charge for lump sum
pension payments 81 32 49 49 0.03 Tax items — 3,674
(3,674 ) (3,674 ) (1.91 )
2017 Adjusted for
Special Items $ 9,797 $
3,272 $ 6,525 $
6,520 $ 3.39
Schedule 7 ALTRIA GROUP, INC.and SubsidiariesCondensed Consolidated
Balance Sheets(dollars in millions)(Unaudited)
March 31,
2018 December 31, 2017
Assets
Cash and cash equivalents $ 2,191 $ 1,253 Inventories 2,257 2,225
Other current assets 376 866 Property, plant and equipment, net
1,891 1,914 Goodwill and other intangible assets, net 17,707 17,707
Investment in AB InBev 18,199 17,952 Finance assets, net 854 899
Other long-term assets 424 386
Total assets $
43,899 $ 43,202
Liabilities and
Stockholders’ Equity
Current portion of long-term debt $ 864 $ 864 Accrued settlement
charges 3,458 2,442 Other current liabilities 3,153 3,486 Long-term
debt 13,033 13,030 Deferred income taxes 5,292 5,247 Accrued
postretirement health care costs 1,987 1,987 Accrued pension costs
382 445 Other long-term liabilities 296 283 Total
liabilities 28,465 27,784 Redeemable noncontrolling interest 37 38
Total stockholders’ equity 15,397 15,380
Total
liabilities and stockholders’ equity $ 43,899
$ 43,202 Total debt $ 13,897 $ 13,894
Schedule 8 ALTRIA GROUP, INC.and
SubsidiariesSupplemental Retail Share Data(Unaudited)
IRI refreshed its cigarette and smokeless products databases in
the first quarter of 2018, which affected previously released
retail share results. Restated share results are summarized
below.
Smokeable Products: Cigarettes Restated Retail Share
(percent)
For the Three Months Ended
12/31/17 9/30/17 6/30/17
3/31/17 Cigarettes: Marlboro 43.1 % 43.2 %
43.5 % 43.7 %
Other premium 2.6 2.7 2.7 2.7
Discount
4.7 4.7 4.7 4.6
Total cigarettes
50.4 % 50.6 % 50.9
% 51.0 % Smokeable Products:
Cigarettes Restated Retail Share (percent)
For the YearEnded
For the NineMonths Ended
For the SixMonths Ended
For the ThreeMonths
Ended
12/31/17 9/30/17 6/30/17
03/31/17 Cigarettes: Marlboro
43.4 % 43.5 % 43.6 % 43.7 %
Other premium 2.7 2.7 2.7 2.7
Discount 4.6 4.6 4.7 4.6
Total cigarettes 50.7 % 50.8
% 51.0 % 51.0 %
Smokeless Products: Restated Retail Share (percent)
For the Three Months Ended 12/31/17
9/30/17 6/30/17 3/31/17
Copenhagen 34.1 % 34.1 % 34.3 % 33.2 %
Skoal
16.3 16.6 16.8 17.4
Copenhagen
and Skoal 50.4 50.7 51.1 50.6
Other 3.4 3.3 3.2 3.1
Total
smokeless products 53.8 % 54.0
% 54.3 % 53.7 %
Smokeless Products: Restated Retail Share (percent)
For the YearEnded
For the NineMonths Ended
For the SixMonths Ended
For the ThreeMonths
Ended
12/31/17 9/30/17 6/30/17
3/31/17 Copenhagen 34.0 % 33.9 % 33.8 %
33.2 %
Skoal 16.7 16.9 17.0 17.4
Copenhagen and Skoal 50.7 50.8
50.8 50.6 Other 3.3 3.2 3.2
3.1
Total smokeless products
54.0 % 54.0 % 54.0
% 53.7 %
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