Please replace the release with the following corrected version
due to revisions in Table 3 - Smokeable Products: Reported
Shipment Volume (sticks in millions) and Table 4 - Smokeable
Products: Cigarettes Retail Share (percent).
The updated release reads:
ALTRIA REPORTS 2022 FIRST-QUARTER
RESULTS; REAFFIRMS 2022 FULL-YEAR EARNINGS GUIDANCE
Altria Group, Inc. (NYSE: MO) today reports its 2022
first-quarter business results and reaffirms its guidance for 2022
full-year adjusted diluted earnings per share (EPS).
“We are off to a strong start to the year and believe our
businesses are on track to deliver against their full-year plans.
Our tobacco businesses performed well in a challenging
macroeconomic environment and we continued to make progress toward
our Vision to responsibly lead the transition of adult smokers to a
smoke-free future,” said Billy Gifford, Altria’s Chief Executive
Officer.
“We reaffirm our guidance to deliver 2022 full-year adjusted
diluted EPS in a range of $4.79 to $4.93. This range represents an
adjusted diluted EPS growth rate of 4% to 7% from a $4.61 base in
2021. We continue to expect that adjusted diluted EPS growth will
be weighted toward the second half of the year.”
Altria Headline Financials1
($ in millions, except per share data)
Q1 2022
Change vs.
Q1 2021
Net revenues
$5,892
(2.4)%
Revenues net of excise taxes
$4,819
(1.3)%
Reported tax rate
26.7%
0.1 pp
Adjusted tax rate
25.1%
0.1 pp
Reported diluted EPS2
$1.08
40.3%
Adjusted diluted EPS2
$1.12
4.7%
1 “Adjusted” financial measures presented in this release
exclude the impact of special items. See “Basis of Presentation”
for more information.
2 “EPS” represents diluted earnings (losses) per share
attributable to Altria.
As previously announced, a conference call with the investment
community and news media will be webcast on April 28, 2022 at 9:00
a.m. Eastern Time. Access to the webcast is available at
www.altria.com/webcasts.
Cash Returns to Shareholders and Capital Markets
Activity
Share Repurchase Program
- In the first quarter, we repurchased 11.3 million shares at an
average price of $50.69, for a total cost of $576 million.
- As of March 31, 2022, we had approximately $1.2 billion
remaining under our existing $3.5 billion share repurchase program,
which we expect to complete by December 31, 2022. Share repurchases
depend on marketplace conditions and other factors, and the program
remains subject to the discretion of our Board of Directors
(Board).
Dividends
- We paid dividends of $1.6 billion in the first quarter.
- We maintain our long-term objective of a dividend payout ratio
target of approximately 80% of our adjusted diluted EPS. Future
dividend payments remain subject to the discretion of our
Board.
Environmental, Social and Governance (ESG)
Our Corporate Responsibility Focus Areas are (i) reducing the
harm of tobacco products, (ii) preventing underage use, (iii)
protecting the environment, (iv) driving responsibility through our
value chain, (v) supporting our people and communities and (vi)
engaging and leading responsibly. Our corporate responsibility
reports are available on the Corporate Responsibility section of
www.altria.com.
- In February, we were recognized as a member of CDP’s 2021
Supplier Engagement Leaderboard for climate change.
- In April, we announced our first virtual power purchase
agreement for energy produced by a new wind farm project in Texas.
This agreement marks significant progress toward two of our
science-based environmental targets - achieving 100% renewable
electricity and reducing operational greenhouse gas emissions by
55% by 2030. When the project is operational, we expect to hit both
those targets ahead of schedule.
- In April, we released our 2021 Engage & Lead Responsibly
report. We expect to release snapshot updates for each of our other
responsibility focus areas in the coming months.
Macroeconomic and Geopolitical Conditions Impacting Our
Businesses
Impact on Tobacco Business Operations
- The Russian invasion of Ukraine has exacerbated increasing
global energy prices and, together with other macroeconomic factors
such as supply and demand imbalances and labor shortages,
contributed to the recent historic rise in the rate of inflation.
Increases in inflation also have a direct and adverse impact on our
Master Settlement Agreement (MSA) expense and other direct and
indirect costs.
- The COVID-19 pandemic continues to contribute to volatility in
the domestic and global economies, including disruptions in the
supply and distribution chain, and changes in consumer behavior.
The economic and business repercussions of COVID-19 have been
compounded by the Russian invasion of Ukraine. While our operating
companies focus on the manufacture and sale of tobacco products in
the United States and have little direct exposure to the impacted
regions, we have experienced negative effects on the cost and
availability of certain raw materials and component parts for our
operating companies’ products. We have worked to mitigate the
potential negative impacts of these macroeconomic and geopolitical
dynamics on our businesses through, among other actions, proactive
engagement with current and potential suppliers and distributors,
the development of alternative sourcing strategies, long-term
supply contracts, implementation of COVID-19 protocols at our
facilities and prudent oversight of our liquidity.
- To date, we have not experienced any material adverse effects
on our businesses or our ability to achieve our Vision as a result
of macroeconomic factors and geopolitical instability. As these
trends and developments evolve and new ones emerge, we will
continue to carefully evaluate the potential impacts on our
business and our Vision.
Impact on Adult Tobacco Consumers (ATCs)
- ATCs continue to face challenges from higher inflation, higher
gas prices, the COVID-19 pandemic and the end of government
stimulus, which could negatively impact ATC disposable income and
future purchasing behaviors. However, increased inflation was
partially offset by improved employment metrics and increased wage
growth for some ATCs. Additionally, the pressures of inflation were
also offset for some ATCs by higher federal income tax refunds. We
continue to monitor the effect of these dynamics on ATCs and their
purchasing behaviors, including overall tobacco product
expenditures, mix between premium and discount brand purchases and
adoption of smoke-free products.
Impact on ABI and JUUL Investments
- ABI’s business has been impacted by macroeconomic and
geopolitical factors, including supply chain constraints across
certain markets, adverse transactional foreign exchange rates,
inflation and commodity cost headwinds. ABI also has direct
exposure to the Russia and Ukraine regions through a joint venture.
As a result, ABI will record a non-cash impairment charge of $1.1
billion on its joint venture in the first quarter of 2022. We will
continue to monitor our investment in ABI, including the impact on
ABI’s business, resulting from near-term supply chain challenges,
inflation and market valuation.
- JUUL may experience similar impacts to its business as our
business due to the macroeconomic risks and geopolitical
instability discussed above. We do not believe JUUL’s business has
been materially impacted by these factors, but the effect of rising
U.S. interest rates has resulted in an increase to the discount
rate, which adversely impacted the fair value of our investment in
JUUL at March 31, 2022. We will continue to monitor for impacts on
JUUL’s business, including near-term supply chain constraints,
component part shortages and inflation, in our quarterly
quantitative valuations of JUUL.
2022 Full-Year Guidance
We reaffirm our guidance to deliver 2022 full-year adjusted
diluted EPS in a range of $4.79 to $4.93, representing a growth
rate of 4% to 7% from an adjusted diluted EPS base of $4.61 in
2021. We continue to expect that 2022 adjusted diluted EPS growth
will be weighted toward the second half of the year. While the 2022
full-year adjusted diluted EPS guidance accounts for a range of
scenarios, the external environment remains dynamic. We will
continue to monitor conditions related to (i) the economy,
including the impact of increased inflation and global supply chain
disruptions, (ii) the impact of current and future COVID-19
variants and mitigation strategies, (iii) ATC dynamics, including
tobacco usage occasions, available disposable income, purchasing
patterns and adoption of smoke-free products, (iv) regulatory and
legislative developments and (v) the impacts of the Russian
invasion of Ukraine.
Our 2022 full-year adjusted diluted EPS guidance range includes
planned investments in support of our Vision, such as (i) costs to
enhance our digital consumer engagement system, (ii) increased
smoke-free product research, development and regulatory preparation
expenses and (iii) marketplace activities in support of our
smoke-free products. The guidance range also includes anticipated
inflationary increases in MSA expenses and direct materials costs
and our current expectation that PM USA will not have access to the
IQOS system in 2022.
Our full-year adjusted diluted EPS guidance range excludes 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, asset impairment charges, acquisition-related and
disposition-related costs, equity investment-related special items
(including any changes in fair value of our equity investment
recorded using the fair value option and any changes in the fair
value of related warrants and preemptive rights), certain income
tax items, charges associated with tobacco and health and certain
other litigation items, and resolutions of certain
non-participating manufacturer (NPM) adjustment disputes under the
MSA (such dispute resolutions are referred to as NPM Adjustment
Items). See Table 1 below for the income and expense items for the
first quarter of 2022.
Our 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 our reported diluted EPS
because these items, which could be significant, may be unusual or
infrequent, are difficult to predict and may be highly variable. As
a result, we do not provide a corresponding U.S. generally accepted
accounting principles (GAAP) measure for, or reconciliation to, our
adjusted diluted EPS guidance.
ALTRIA GROUP, INC.
See “Basis of Presentation” below for an explanation of
financial measures and reporting segments discussed in this
release.
Financial Performance
- Net revenues decreased 2.4% to $5.9 billion, primarily driven
by the sale of our wine business in October 2021. Excluding the
wine segment, net revenues were essentially unchanged. Revenues net
of excise taxes decreased 1.3% to $4.8 billion.
- Reported diluted EPS increased 40.3% to $1.08, primarily driven
by 2021 losses on early extinguishment of debt, higher reported
operating companies income (OCI), lower unrealized losses related
to the changes in estimated fair value of our investment in JUUL,
fewer shares outstanding, and favorable interest expense. These
items were partially offset by unfavorable Cronos-related special
items and lower reported earnings from our investment in ABI.
- Adjusted diluted EPS increased 4.7% to $1.12, primarily driven
by higher adjusted OCI, fewer shares outstanding and favorable
interest expense, partially offset by lower adjusted earnings from
our investment in ABI.
Table 1 - Altria’s Adjusted
Results
First Quarter
2022
2021
Change
Reported diluted EPS
$
1.08
$
0.77
40.3 %
NPM Adjustment Items
(0.02
)
(0.01
)
Asset impairment, exit, implementation,
acquisition and disposition-related costs
—
0.02
Tobacco and health and certain other
litigation items
—
0.01
JUUL changes in fair value
0.05
0.10
ABI-related special items
(0.02
)
(0.05
)
Cronos-related special items
0.03
(0.04
)
Loss on early extinguishment of debt
—
0.27
Adjusted diluted EPS
$
1.12
$
1.07
4.7 %
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 Schedules 4 and 5.
NPM Adjustment Items
- In the first quarter of 2022, we recorded pre-tax income of $60
million (or $0.02 per share) due to NPM Adjustment Items.
- In the first quarter of 2021, we recorded pre-tax income of $32
million (or $0.01 per share) due to NPM Adjustment Items.
JUUL Changes in Fair Value
- In the first quarter of 2022, we recorded a non-cash pre-tax
unrealized loss of $100 million (or $0.05 per share) as a result of
a decrease in the estimated fair value of our investment in JUUL. A
corresponding adjustment was made to the JUUL tax valuation
allowance. As of March 31, 2022, the estimated fair value of our
investment in JUUL was $1.6 billion.
- In the first quarter of 2021, we recorded a non-cash pre-tax
unrealized loss of $200 million (or $0.10 per share) as a result of
a decrease in the estimated fair value of our investment in JUUL. A
corresponding adjustment was made to the JUUL tax valuation
allowance.
ABI-Related Special Items
- In the first quarter of 2022, equity earnings from ABI included
net pre-tax income of $59 million (or $0.02 per share), primarily
related to ABI’s mark-to-market gains on certain ABI financial
instruments associated with its share commitments.
- In the first quarter of 2021, equity earnings from ABI included
pre-tax income of $128 million (or $0.05 per share), consisting
primarily of (i) ABI’s completion of the issuance of a minority
stake in its U.S.-based metal container operations, (ii)
mark-to-market gains on certain ABI financial instruments
associated with its share commitments and (iii) charges associated
with an early bond termination by ABI.
The ABI-related special items above include our respective share
of the amounts recorded by ABI and additional adjustments related
to (i) conversion from international financial reporting standards
to GAAP and (ii) adjustments to our investment required under the
equity method of accounting.
Cronos-Related Special Items
In the first quarter, we recorded net pre-tax (income) expense
consisting of the following:
First Quarter
($ in millions, except per share
data)
2022
2021
(Gain) loss on Cronos-related financial
instruments 1
$
10
$
(110
)
(Income) losses from equity investments
2
51
40
Total Cronos-related special items -
(income) expense
$
61
$
(70
)
Earnings per share
$
0.03
$
(0.04
)
1 Amounts are related to the non-cash change in the fair value
of the warrant and certain anti-dilution protections.
2 Amounts include our share of special items recorded by Cronos
and additional adjustments, if required under the equity method of
accounting, related to our investment in Cronos.
We recorded corresponding adjustments to the Cronos tax
valuation allowance in 2022 and 2021.
Loss on Early Extinguishment of Debt
- In the first quarter of 2021, we recorded pre-tax losses on
early extinguishment of debt of $649 million (or $0.27 per
share).
SMOKEABLE PRODUCTS
Revenues and OCI
- Net revenues increased 0.3% primarily driven by higher pricing
and lower promotional investments, partially offset by lower
shipment volume. Revenues net of excise taxes increased 2.2%.
- Reported OCI increased 7.9%, primarily driven by higher
pricing, lower promotional investments, higher NPM Adjustment Items
and lower tobacco and health litigation items, partially offset by
lower shipment volume and higher per unit settlement charges.
- Adjusted OCI increased 5.7%, primarily driven by higher pricing
and lower promotional investments, partially offset by lower
shipment volume and higher per unit settlement charges. Adjusted
OCI margins increased by 2.0 percentage points to 59.5%.
Table 2 - Smokeable Products: Revenues
and OCI ($ in millions)
First Quarter
2022
2021
Change
Net revenues
$
5,265
$
5,250
0.3 %
Excise taxes
(1,044
)
(1,121
)
Revenues net of excise taxes
$
4,221
$
4,129
2.2 %
Reported OCI
$
2,559
$
2,372
7.9 %
NPM Adjustment Items
(60
)
(32
)
Tobacco and health and certain other
litigation items
12
35
Adjusted OCI
$
2,511
$
2,375
5.7 %
Adjusted OCI margins 1
59.5
%
57.5
%
2.0 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 decreased 6.3%, primarily driven by the industry’s decline
rate and retail share losses, partially offset by trade inventory
movements.
- When adjusted for trade inventory movements and other factors,
smokeable products segment domestic cigarette shipment volume
decreased by an estimated 8%.
- When adjusted for trade inventory movements and other factors,
total estimated domestic cigarette industry volume decreased by an
estimated 6.5%.
- Reported cigar shipment volume decreased 9.6%.
Table 3 - Smokeable Products: Reported
Shipment Volume (sticks in millions)
First Quarter
2022
2021
Change
Cigarettes:
Marlboro
18,290
19,415
(5.8
) %
Other premium
937
981
(4.5
) %
Discount
1,390
1,618
(14.1
) %
Total cigarettes
20,617
22,014
(6.3
) %
Cigars:
Black & Mild
433
479
(9.6
) %
Other
1
1
—
%
Total cigars
434
480
(9.6
) %
Total smokeable products
21,051
22,494
(6.4
) %
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
- Marlboro retail share of the total cigarette category decreased
0.4 share points to 42.6%, primarily due to increased macroeconomic
pressures on ATC disposable income. Marlboro retail share was
unchanged from the fourth quarter of 2021.
- The cigarette industry discount retail share increased 1.0
share point to 26.4%, primarily due to the ATC factors mentioned
above. Cigarette industry discount retail share increased 0.3 share
points from the fourth quarter of 2021.
Table 4 - Smokeable Products:
Cigarettes Retail Share (percent)
First Quarter
2022
2021
Percentage point
change
Cigarettes:
Marlboro
42.6
%
43.0
%
(0.4
)
Other premium
2.3
2.3
—
Discount
3.2
3.6
(0.4
)
Total cigarettes
48.1
%
48.9
%
(0.8
)
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.
ORAL TOBACCO PRODUCTS
Revenues and OCI
- Net revenues decreased 2.1%, primarily driven by higher
promotional investments in on!, lower shipment volume, and a shift
between MST and on! shipment volumes resulting in a higher
percentage of on! volumes versus the prior year (mix shift),
partially offset by higher pricing. Revenues net of excise taxes
decreased 1.8%.
- Reported OCI increased 3.8%, primarily driven by higher pricing
and 2021 acquisition-related costs, partially offset by higher
promotional investments in on!, lower shipment volume, mix shift
and higher costs.
- Adjusted OCI decreased 5.1%, primarily driven by higher
promotional investments in on!, lower shipment volume, mix shift
and higher costs, partially offset by higher pricing. Adjusted OCI
margins declined by 2.4 percentage points to 69.7%.
Table 5 - Oral Tobacco Products:
Revenues and OCI ($ in millions)
First Quarter
2022
2021
Change
Net revenues
$
613
$
626
(2.1) %
Excise taxes
(29
)
(31
)
Revenues net of excise taxes
$
584
$
595
(1.8) %
Reported OCI
$
407
$
392
3.8 %
Asset impairment, exit, implementation,
acquisition and disposition-related costs
—
37
Adjusted OCI
$
407
$
429
(5.1) %
Adjusted OCI margins 1
69.7
%
72.1
%
(2.4) pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
Shipment Volume
- Oral tobacco products segment reported domestic shipment volume
decreased 1.9%, primarily driven by trade inventory
movements and retail share losses, partially offset by the
industry’s growth rate, calendar differences and other factors.
When adjusted for trade inventory movements and calendar
differences, oral tobacco products segment shipment volume was
unchanged.
- Total oral tobacco industry volume increased by an estimated
1.5% over the past six months, driven by growth in oral nicotine
pouches, partially offset by declines in MST volumes.
Table 6 - Oral Tobacco Products:
Reported Shipment Volume (cans and packs in millions)
First Quarter
2022
2021
Change
Copenhagen
115.2
122.9
(6.3
) %
Skoal
43.9
48.2
(8.9
) %
on!
18.3
9.2
98.9
%
Other
16.7
17.6
(5.1
) %
Total oral tobacco products
194.1
197.9
(1.9
) %
Note: Volume includes cans and packs sold, as well as
promotional units, but excludes international volume, which is
currently not material to the oral tobacco products segment. New
types of oral tobacco products, as well as new packaging
configurations of existing oral tobacco products, may or may not be
equivalent to existing MST products on a can-for-can basis. To
calculate volumes of cans and packs shipped, one pack of snus or
one can of oral nicotine pouches, irrespective of the number of
pouches in the pack, is assumed to be equivalent to one can of
MST.
Retail Share and Brand Activity
- Oral tobacco products segment retail share was 46.9%, and
Copenhagen continued to be the leading oral tobacco brand with a
retail share of 28.0%. Share losses in the oral tobacco products
segment, including Copenhagen, were primarily due to the growth of
oral nicotine pouches.
- Total U.S. oral tobacco category share for on! nicotine pouches
grew to 4.1% in the first quarter, an increase of 2.5 percentage
points.
Table 7 - Oral Tobacco Products: Retail
Share (percent)
First Quarter
2022
2021
Percentage point
change
Copenhagen
28.0
%
30.2
%
(2.2
)
Skoal
11.7
12.9
(1.2
)
on!
4.1
1.6
2.5
Other
3.1
3.3
(0.2
)
Total oral tobacco products
46.9
%
48.0
%
(1.1
)
Note: The oral tobacco products retail share results exclude
international volume. Retail share results for oral tobacco
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. Oral tobacco products
is defined by IRI as moist smokeless, snus and oral nicotine
pouches. New types of oral tobacco products, as well as new
packaging configurations of existing oral tobacco products, may or
may not be equivalent to existing MST products on a can-for-can
basis. For example, one pack of snus or one can of oral nicotine
pouches, 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.
Altria’s Profile
We have a leading portfolio of tobacco products for U.S. tobacco
consumers age 21+. Our Vision by 2030 is to responsibly lead the
transition of adult smokers to a smoke-free future (Vision). We are
Moving Beyond Smoking™, leading the way in moving adult smokers
away from cigarettes by taking action to transition millions to
potentially less harmful choices - believing it is a substantial
opportunity for adult tobacco consumers, our businesses and
society.
Our wholly owned subsidiaries include leading manufacturers of
both combustible and smoke-free products. In combustibles, we own
Philip Morris USA Inc. (PM USA), the most profitable U.S. cigarette
manufacturer, and John Middleton Co. (Middleton), a leading U.S
cigar manufacturer. Our smoke-free portfolio includes ownership of
U.S. Smokeless Tobacco Company LLC (USSTC), the leading global
moist smokeless tobacco (MST) manufacturer, and Helix Innovations
LLC (Helix), a rapidly growing manufacturer of oral nicotine
pouches. We also enhance our smoke-free product portfolio with
exclusive U.S. commercialization rights to the IQOS Tobacco Heating
System® and Marlboro HeatSticks®, and an equity investment in JUUL
Labs, Inc. (JUUL).
We also own equity investments in Anheuser-Busch InBev SA/NV
(ABI), the world’s largest brewer, and Cronos Group Inc. (Cronos),
a leading Canadian cannabinoid company.
The brand portfolios of our tobacco operating companies include
Marlboro®, Black & Mild®, Copenhagen®, Skoal® and on!®.
Trademarks and service marks related to Altria referenced in this
release are the property of Altria or its subsidiaries or are used
with permission.
Learn more about Altria at www.altria.com and follow us on Twitter, Facebook
and LinkedIn.
Basis of Presentation
We report our financial results in accordance with GAAP. Our
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, our
segments. Our management also reviews certain financial results,
including OCI, OCI margins and diluted EPS, on an adjusted basis,
which excludes certain income and expense items, including those
items noted under “2022 Full-Year Guidance.” Our management does
not view any of these special items to be part of our underlying
results as they may be highly variable, may be unusual or
infrequent, are difficult to predict and can distort underlying
business trends and results. Our management also reviews income tax
rates on an adjusted basis. Our adjusted effective tax rate may
exclude certain income tax items from our reported effective tax
rate. Our 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. Our 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 required by, or calculated in
accordance 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. We
provide reconciliations of historical adjusted financial measures
to corresponding GAAP measures in this release.
We use the equity method of accounting for our investment in ABI
and Cronos and report our share of ABI’s and Cronos’s results using
a one-quarter lag because ABI’s and Cronos’s results are not
available in time for us to record them in the concurrent period.
The one-quarter reporting lag for ABI and Cronos does not affect
our cash flows.
Our reportable segments are (i) smokeable products, including
combustible cigarettes and cigars manufactured and sold by PM USA
and Middleton, respectively, and (ii) oral tobacco products,
including MST and snus products manufactured and sold by USSTC, and
oral nicotine pouches sold by Helix. Prior to the sale of Ste.
Michelle Wine Estates Ltd. (Ste. Michelle) on October 1, 2021, wine
produced and/or sold by Ste. Michelle was a reportable segment. We
have included results for innovative tobacco products and Philip
Morris Capital Corporation 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 release are described
in our publicly filed reports, including our Annual Report on Form
10-K for the year ended December 31, 2021. We caution 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. These factors include the
following:
- unfavorable litigation outcomes, including risks associated
with adverse jury and judicial determinations, courts and
arbitrators reaching conclusions at variance with our or any of our
investees’ understanding of applicable law, bonding requirements in
the jurisdictions that do not limit the dollar amount of appeal
bonds, and certain challenges to bond cap statutes;
- government (including the U.S. Food and Drug Administration
(FDA)) and private sector actions that impact adult tobacco
consumer acceptability of, or access to, tobacco products;
- tobacco product taxation, including lower tobacco product
consumption levels and potential shifts in adult tobacco consumer
purchases as a result of federal, state and local excise tax
increases, and excise taxes on e-vapor and oral nicotine products
and the impact on adult tobacco consumers’ transition to lower
priced tobacco products;
- unfavorable outcomes of any government investigations of us or
our investees;
- a successful challenge to our tax positions, an increase to the
corporate income tax rate or other changes to federal or state tax
laws;
- the risks related to our and our investees’ international
business operations, including failure to prevent violations of
various United States and foreign laws and regulations such as
foreign privacy laws and laws prohibiting bribery and
corruption;
- the risks associated with health epidemics and pandemics,
including the COVID-19 pandemic and similar outbreaks, such as
their impact on our and our investees’ ability to continue
manufacturing and distributing products (directly or indirectly due
to their impact on suppliers, distributors and distribution chain
service providers) and their impact on macroeconomic conditions
and, in turn, adult tobacco consumer purchasing behavior;
- the failure of our and our investees’ efforts to compete
effectively in their respective markets;
- the growth of the e-vapor category and other innovative tobacco
products, including oral nicotine pouches, contributing to
reductions in cigarette and MST consumption levels and sales
volume;
- our ability to promote brand equity successfully; anticipate
and respond to evolving adult tobacco consumer preferences;
develop, manufacture, market and distribute products that appeal to
adult tobacco consumers; promote productivity; and protect or
enhance margins through cost savings and price increases;
- our unsuccessful commercialization of innovative products or
processes, including innovative tobacco products that may reduce
the health risks associated with cigarettes and other traditional
tobacco products, and that appeal to adult tobacco consumers;
- changes, including in macroeconomic and geopolitical conditions
(including inflation), that result in shifts in adult tobacco
consumer disposable income and purchasing behavior, including
choosing lower-priced and discount brands;
- significant changes in price, availability or quality of
tobacco, other raw materials or component parts, including as a
result of changes in macroeconomic, climate and geopolitical
conditions, including the Russian invasion of Ukraine;
- the risks, including FDA regulatory risks, related to our and
our investees’ reliance on a few significant facilities and a small
number of key suppliers, distributors and distribution chain
service providers, and the risk of an extended disruption at a
facility of, or of service by, a supplier, distributor or
distribution chain service provider of our tobacco subsidiaries or
our investees;
- required or voluntary product recalls as a result of various
circumstances such as product contamination or FDA or other
regulatory action;
- the failure of our information systems or the information
systems of key suppliers or service providers to function as
intended, or cyber attacks or security breaches;
- our inability to attract and retain the best talent due to the
impact of decreasing social acceptance of tobacco usage, tobacco
control actions and other factors, including current labor market
dynamics;
- impairment losses as a result of the write down of intangible
assets, including goodwill;
- the adverse effect of acquisitions, investments, dispositions
or other events on our credit rating;
- our inability to acquire attractive businesses or make
attractive investments on favorable terms, or at all, or to realize
the anticipated benefits from an acquisition or investment and our
inability to dispose of businesses or investments on favorable
terms or at all;
- the risks related to disruption and uncertainty in the credit
and capital markets, including risk of access to these markets both
generally and at current prevailing rates, which may adversely
affect our earnings or dividend rate or both;
- our inability to attract and retain investors due to the impact
of decreasing social acceptance of tobacco usage or unfavorable
environmental, social and governance ratings;
- the risk that any challenge to our investment in JUUL, if
successful, could result in a broad range of resolutions, including
divestiture of the investment or rescission of the
transaction;
- the risks generally related to our investments in JUUL and
Cronos, including our inability to realize the expected benefits of
our investments in the expected time frames, or at all, due to the
risks encountered by our investees in their businesses, such as
operational, competitive, compliance, litigation and reputational
risks, and legislative and regulatory risks at the international,
federal, state and local levels; and impairment of our investment
in Cronos and changes in the fair value of our investment in
JUUL;
- the risks related to our inability to acquire a controlling
interest in JUUL as a result of standstill restrictions or to
control the material decisions of JUUL, restrictions on our ability
to sell or otherwise transfer our shares of JUUL until December 20,
2024, and non-competition restrictions for the same time period
subject to certain exceptions;
- the risks associated with our investment in ABI, including
effects of the COVID-19 pandemic, foreign currency exchange rates
and macroeconomic and geopolitical conditions, including the
Russian invasion of Ukraine, on ABI’s business and the impact on
our earnings from, and carrying value of, our investment in
ABI;
- the risks related to our ownership percentage in ABI decreasing
below certain levels, including additional tax liabilities, a
reduction in the number of directors that we have the right to have
appointed to the ABI board of directors and our potential inability
to use the equity method of accounting for our investment in
ABI;
- the risk of challenges to the tax treatment of the
consideration we received in the ABI/SABMiller plc business
combination and the tax treatment of our equity investment;
and
- the risks, including criminal, civil or tax liability, related
to our or Cronos’s failure to comply with applicable laws,
including cannabis laws.
We caution that the foregoing list of factors is not complete
and we do not undertake to update any forward-looking statements
that we may make except as required by applicable law. All
subsequent written and oral forward-looking statements attributable
to Altria or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements referenced
above.
Schedule 1
ALTRIA GROUP, INC.
and Subsidiaries
Consolidated Statements of
Earnings
For the Quarters Ended March
31,
(dollars in millions, except per
share data)
(Unaudited)
2022
2021
% Change
Net revenues
$
5,892
$
6,036
(2.4) %
Cost of sales 1
1,446
1,608
Excise taxes on products 1
1,073
1,156
Gross profit
3,373
3,272
3.1%
Marketing, administration and research
costs
412
504
Operating companies income
2,961
2,768
7.0%
Amortization of intangibles
17
17
General corporate expenses
60
61
Operating income
2,884
2,690
7.2%
Interest and other debt expense, net
281
308
Net periodic benefit income, excluding
service cost
(46
)
(43
)
Loss on early extinguishment of debt
—
649
(Income) losses from equity investments
1
(34
)
(51
)
(Gain) loss on Cronos-related financial
instruments
10
(110
)
Earnings before income taxes
2,673
1,937
38.0%
Provision for income taxes
714
516
Net earnings
1,959
1,421
37.9%
Net losses attributable to noncontrolling
interests
—
3
Net earnings attributable to
Altria
$
1,959
$
1,424
37.6%
Per share data:
Diluted earnings per share attributable
to Altria
$
1.08
$
0.77
40.3%
Weighted-average diluted shares
outstanding
1,818
1,857
(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, excise taxes on products sold
and (income) losses from equity investments is shown in Schedule
3.
Schedule 2
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data
For the Quarters Ended March
31,
(dollars in millions)
(Unaudited)
Net Revenues
Smokeable Products
Oral Tobacco Products
Wine
All Other
Total
2022
$
5,265
$
613
$
—
$
14
$
5,892
2021
5,250
626
150
10
6,036
% Change
0.3
%
(2.1
) %
(100.0
) %
40.0
%
(2.4
) %
Reconciliation:
For the quarter ended March 31,
2021
$
5,250
$
626
$
150
$
10
$
6,036
Operations
15
(13
)
(150
)
4
(144
)
For the quarter ended March 31,
2022
$
5,265
$
613
$
—
$
14
$
5,892
Operating Companies Income
(Loss)
Smokeable Products
Oral Tobacco Products
Wine
All Other
Total
2022
$
2,559
$
407
$
—
$
(5
)
$
2,961
2021
2,372
392
18
(14
)
2,768
% Change
7.9
%
3.8
%
(100.0
) %
64.3
%
7.0
%
Reconciliation:
For the quarter ended March 31,
2021
$
2,372
$
392
$
18
$
(14
)
$
2,768
NPM Adjustment Items - 2021
(32
)
—
—
—
(32
)
Asset impairment, exit, implementation,
acquisition and disposition-related costs - 2021
—
37
1
—
38
Tobacco and health and certain other
litigation items - 2021
35
—
—
—
35
3
37
1
—
41
NPM Adjustment Items - 2022
60
—
—
—
60
Tobacco and health and certain other
litigation items - 2022
(12
)
—
—
—
(12
)
48
—
—
—
48
Operations
136
(22
)
(19
)
9
104
For the quarter ended March 31,
2022
$
2,559
$
407
$
—
$
(5
)
$
2,961
Schedule 3
ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data
(dollars in millions)
(Unaudited)
For the Quarters Ended March
31,
2022
2021
The segment detail of excise taxes on
products sold is as follows:
Smokeable products
$
1,044
$
1,121
Oral tobacco products
29
31
Wine
—
4
$
1,073
$
1,156
The segment detail of charges for
resolution expenses related to state settlement agreements included
in cost of sales is as follows:
Smokeable products
$
879
$
941
Oral tobacco products
2
2
$
881
$
943
The segment detail of FDA user fees
included in cost of sales is as follows:
Smokeable products
$
68
$
68
Oral tobacco products
1
1
$
69
$
69
The detail of (income) losses from
equity investments is as follows:
ABI
$
(200
)
$
(318
)
Cronos
66
67
JUUL
100
200
$
(34
)
$
(51
)
Schedule 4
ALTRIA GROUP, INC.
and Subsidiaries
Net 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
2022 Net Earnings
$
1,959
$
1.08
2021 Net Earnings
$
1,424
$
0.77
% Change
37.6
%
40.3
%
Reconciliation:
2021 Net Earnings
$
1,424
$
0.77
2021 NPM Adjustment Items
(24
)
(0.01
)
2021 Asset impairment, exit,
implementation, acquisition and
disposition-related costs
37
0.02
2021 Tobacco and health and certain other
litigation items
26
0.01
2021 JUUL changes in fair value
200
0.10
2021 ABI-related special items
(100
)
(0.05
)
2021 Cronos-related special items
(70
)
(0.04
)
2021 Loss on early extinguishment of
debt
496
0.27
2021 Income tax items
(6
)
—
Subtotal 2021 special items
559
0.30
2022 NPM Adjustment Items
45
0.02
2022 Asset impairment, exit,
implementation, acquisition and
disposition-related costs
(5
)
—
2022 Tobacco and health and certain other
litigation items
(9
)
—
2022 JUUL changes in fair value
(100
)
(0.05
)
2022 ABI-related special items
47
0.02
2022 Cronos-related special items
(61
)
(0.03
)
2022 Income tax items
(5
)
—
Subtotal 2022 special items
(88
)
(0.04
)
Fewer shares outstanding
—
0.02
Change in tax rate
(4
)
—
Operations
68
0.03
2022 Net Earnings
$
1,959
$
1.08
Schedule 5
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and
non-GAAP Measures
For the Quarters Ended March
31,
(dollars in millions, except per
share data)
(Unaudited)
Earnings before Income
Taxes
Provision for Income
Taxes
Net Earnings
Net Earnings Attributable to
Altria
Diluted EPS
2022 Reported
$
2,673
$
714
$
1,959
$
1,959
$
1.08
NPM Adjustment Items
(60
)
(15
)
(45
)
(45
)
(0.02
)
Asset impairment, exit, implementation,
acquisition and disposition-related costs
7
2
5
5
—
Tobacco and health and certain other
litigation items
12
3
9
9
—
JUUL changes in fair value
100
—
100
100
0.05
ABI-related special items
(59
)
(12
)
(47
)
(47
)
(0.02
)
Cronos-related special items
61
—
61
61
0.03
Income tax items
—
(5
)
5
5
—
2022 Adjusted for Special Items
$
2,734
$
687
$
2,047
$
2,047
$
1.12
2021 Reported
$
1,937
$
516
$
1,421
$
1,424
$
0.77
NPM Adjustment Items
(32
)
(8
)
(24
)
(24
)
(0.01
)
Asset impairment, exit, implementation,
acquisition and disposition-related costs
48
11
37
37
0.02
Tobacco and health and certain other
litigation items
35
9
26
26
0.01
JUUL changes in fair value
200
—
200
200
0.10
ABI-related special items
(128
)
(28
)
(100
)
(100
)
(0.05
)
Cronos-related special items
(70
)
—
(70
)
(70
)
(0.04
)
Loss on early extinguishment of debt
649
153
496
496
0.27
Income tax items
—
6
(6
)
(6
)
—
2021 Adjusted for Special Items
$
2,639
$
659
$
1,980
$
1,983
$
1.07
2022 Reported Net Earnings
$
1,959
$
1.08
2021 Reported Net Earnings
$
1,424
$
0.77
% Change
37.6
%
40.3
%
2022 Net Earnings Adjusted for Special
Items
$
2,047
$
1.12
2021 Net Earnings Adjusted for Special
Items
$
1,983
$
1.07
% Change
3.2
%
4.7
%
Schedule 6
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and
non-GAAP Measures
For the Year Ended December 31,
2021
(dollars in millions, except per
share data)
(Unaudited)
Earnings before Income
Taxes
Provision for Income
Taxes
Net Earnings
Net Earnings Attributable to
Altria
Diluted EPS
2021 Reported
$
3,824
$
1,349
$
2,475
$
2,475
$
1.34
NPM Adjustment Items
(76
)
(19
)
(57
)
(57
)
(0.03
)
Asset impairment, exit, implementation,
acquisition and disposition-related costs
120
21
99
99
0.05
Tobacco and health and certain other
litigation items
182
44
138
138
0.07
ABI-related special items
6,203
1,302
4,901
4,901
2.66
Cronos-related special items
466
(4
)
470
470
0.25
Loss on early extinguishment of debt
649
153
496
496
0.27
Income tax items
—
3
(3
)
(3
)
—
2021 Adjusted for Special Items
$
11,368
$
2,849
$
8,519
$
8,519
$
4.61
Schedule 7
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Consolidated Balance
Sheets
(dollars in millions)
(Unaudited)
March 31, 2022
December 31, 2021
Assets
Cash and cash equivalents
$
5,353
$
4,544
Inventories
1,214
1,194
Other current assets
195
345
Property, plant and equipment, net
1,547
1,553
Goodwill and other intangible assets,
net
17,466
17,483
Investments in equity securities
13,479
13,481
Other long-term assets
981
923
Total assets
$
40,235
$
39,523
Liabilities and
Stockholders’ Equity (Deficit)
Current portion of long-term debt
$
2,517
$
1,105
Accrued settlement charges
4,229
3,349
Other current liabilities
4,182
4,125
Long-term debt
25,405
26,939
Deferred income taxes
3,766
3,692
Accrued pension costs
199
200
Accrued postretirement health care
costs
1,438
1,436
Other long-term liabilities
259
283
Total liabilities
41,995
41,129
Total stockholders’ equity (deficit)
(1,760
)
(1,606
)
Total liabilities and stockholders’
equity (deficit)
$
40,235
$
39,523
Total debt
$
27,922
$
28,044
Schedule 8
ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data for
Special Items
For the Quarters Ended March
31,
(dollars in millions)
(Unaudited)
Cost of Sales
Marketing, administration and
research costs
General corporate
expenses
Loss on early extinguishment
of debt
(Income) losses from equity
investments
(Gain) loss on Cronos-related
financial instruments
2022 Special Items - (Income)
Expense
NPM Adjustment Items
$
(60
)
$
—
$
—
$
—
$
—
$
—
Asset impairment, exit, implementation,
acquisition and
disposition-related costs
—
—
7
—
—
—
Tobacco and health and certain other
litigation items
—
12
—
—
—
—
JUUL changes in fair value
—
—
—
—
100
—
ABI-related special items
—
—
—
—
(59
)
—
Cronos-related special items
—
—
—
—
51
10
2021 Special Items - (Income)
Expense
NPM Adjustment Items
$
(32
)
$
—
$
—
$
—
$
—
$
—
Asset impairment, exit, implementation,
acquisition and
disposition-related costs
1
37
10
—
—
—
Tobacco and health and certain other
litigation items
—
35
—
—
—
—
JUUL changes in fair value
—
—
—
—
200
—
ABI-related special items
—
—
—
—
(128
)
—
Cronos-related special items
—
—
—
—
40
(110
)
Loss on early extinguishment of debt
—
—
—
649
—
—
Note: This schedule is intended to provide supplemental
financial data for certain income and expense items that management
believes are not part of underlying operations and their
presentation in Altria’s consolidated statements of earnings. This
schedule is not intended to provide, or reconcile, non-GAAP
financial measures.
Schedule 9
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data for Net
Revenues
For the Quarters Ended March
31,
(dollars in millions)
(Unaudited)
2022
2021
Change
Net Revenues:
Smokeable products
$
5,265
$
5,250
Oral tobacco products
613
626
Wine
—
150
All Other
14
10
Net revenues
5,892
6,036
(2.4
) %
Less: Wine
—
(150
)
Net revenues excluding wine
segment
$
5,892
$
5,886
0.1
%
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