- Altria’s 2017 fourth-quarter
reported diluted earnings per share (EPS) decreased 50.7% to $2.60,
as comparisons were affected by special items.
- Altria’s 2017 fourth-quarter
adjusted diluted EPS, which excludes the impact of special items,
increased 33.8% to $0.91.
- Altria’s 2017 full-year reported
diluted EPS decreased 27.1% to $5.31, as comparisons were affected
by special items.
- Altria’s 2017 full-year adjusted
diluted EPS, which excludes the impact of special items, increased
11.9% to $3.39.
- Altria announces a new $1 billion
share repurchase program to be completed by the end of 2018, having
completed its prior $4 billion share repurchase program in
January.
- Altria’s Chairman and Chief
Executive Officer Marty Barrington announces his decision to retire
at the conclusion of the May 17, 2018 Annual Shareholder Meeting;
Altria’s Board of Directors (Board) has elected Howard Willard, 54,
to serve as Chairman and Chief Executive Officer and Billy Gifford,
47, to serve as Vice Chairman and Chief Financial Officer.
Altria Group, Inc. (Altria) (NYSE:MO) today announced its 2017
fourth-quarter and full-year business results and provided its
guidance for 2018 full-year adjusted diluted EPS.
“Altria had another strong year in 2017,” said Marty Barrington,
Altria’s Chairman, Chief Executive Officer and President. “We
delivered outstanding financial performance and continued to focus
on rewarding our shareholders - paying out $4.8 billion in
dividends, increasing our dividend by 8.2% and repurchasing more
than $2.9 billion in shares. Our 2017 total shareholder return of
9.4% follows four consecutive years of returns exceeding 20%. Over
this five-year period, our total shareholder return of 181%
outperformed both the S&P 500 and S&P Food, Beverage and
Tobacco Index by more than 70%.”
“That success was built on our core tobacco businesses, which
delivered strong income growth and expanded their already high
margins, despite a year with some unique challenges. Further, we
acquired Nat Sherman to improve our smokeable segment’s position in
the growing super-premium cigarette segment. We also accomplished
several other important strategic initiatives for future success,
including making significant progress toward our goal of becoming
the U.S. leader in authorized, non-combustible reduced-risk
products. And the passage of federal tax reform strengthens our
financial capability to further invest in our businesses and reward
our shareholders.”
“We thus are forecasting 2018 full-year adjusted diluted EPS
growth in a range of 15% to 19%.”
Conference Call
As previously announced, a conference call with the investment
community and news media will be webcast on February 1, 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.
Chairman and CEO
Transition
Altria announces today that Marty Barrington has decided to
retire later this year at age 65, having completed more than 25
years of distinguished service, including six years as Chairman and
CEO. The Board has elected Howard Willard, 54, to serve as Altria’s
Chairman and CEO, effective May 17, 2018, at the conclusion of the
2018 Annual Meeting of Shareholders (2018 Annual Meeting). The
Board also elected Mr. Willard to Altria’s Board, effective
February 1, 2018.
Mr. Willard has served in numerous senior leadership roles
during his 25-year career at the company. These include his current
position of Chief Operating Officer and prior roles as Chief
Financial Officer and Executive Vice President of Strategy and
Business Development. He also was a director of SABMiller plc
(SABMiller).
Additionally, the Board elected Billy Gifford, 47, to serve as
Altria’s Vice Chairman and Chief Financial Officer, also effective
May 17, 2018, at the conclusion of the 2018 Annual Meeting. Mr.
Gifford’s 23-year career includes his current position as Altria’s
Chief Financial Officer and prior roles as Altria’s Senior Vice
President, Strategy and Business Development and President and CEO
of Philip Morris USA. Mr. Gifford is currently a director at
Anheuser-Busch InBev SA/NV (AB InBev).
“It has been an enormous privilege to lead our great company
with a talented leadership team and terrific employees,” said Mr.
Barrington. “Howard has been essential to that team and is
immensely qualified and ready to take Altria forward when I step
away in May. Billy likewise has been an essential contributor to
our strategies and successful operating performance. Together, they
have the confidence of me and the Board of Directors to continue
Altria’s enduring success.”
“The Board is grateful for Marty’s extraordinary leadership the
last several years, as Altria has outperformed our competitive
benchmarks,” said Thomas Farrell, the Presiding Director. “Our
election of Howard as the next Chairman and CEO is the result of
our long-term succession planning process. We believe he has the
proven leadership skills, track record and strategic mindset to
lead the next chapter of Altria’s remarkable story.”
“I’m honored to be elected to follow Marty in this role,” said
Mr. Willard. “He leads the company with decisive leadership and
clarity, and during the past six years of his leadership, the
company has been tremendously successful. I look forward to
building on that success with Billy Gifford, our strong management
team and our talented employees to continue to generate consistent
growth and long-term value for our shareholders.”
Cash Returns to Shareholders -
Dividends and Share Repurchase
In December 2017, the Board declared a regular quarterly
dividend of $0.66 per share. Altria’s current annualized dividend
rate is $2.64 per share. As of January 26, 2018, Altria’s
annualized dividend yield was 3.7%. Altria paid approximately $1.3
billion in dividends in the fourth quarter and $4.8 billion in
2017. From the end of 2012 through 2017, Altria has paid
shareholders $21 billion in dividends. Altria expects to continue
to return a large amount of cash to shareholders in the form of
dividends by maintaining a dividend payout ratio target of
approximately 80% of its adjusted diluted EPS. Future dividend
payments remain subject to the discretion of the Board.
During the fourth quarter, Altria repurchased 8.4 million shares
under its share repurchase program at an average price of $66.67,
for a total cost of approximately $558 million. As of December 31,
2017, Altria had $18 million remaining in the $4 billion program,
which it subsequently completed in January. Since 2011, Altria has
repurchased approximately $8.5 billion of its shares at an average
price of $44.22. Altria’s Board has authorized a new $1 billion
share repurchase program, which the company expects to complete by
the end of 2018. The timing of share repurchases depends upon
marketplace conditions and other factors. This program remains
subject to the discretion of the Board.
Non-combustible Product
Portfolio
Altria continued to build on its three platforms of
non-combustible, nicotine-containing products for authorization by
the U.S. Food and Drug Administration (FDA).
In smokeless and other oral nicotine-containing products, U.S.
Smokeless Tobacco Company LLC (USSTC) made significant progress on
its modified risk tobacco product application for Copenhagen Snuff,
which it plans to file in the first quarter of 2018.
In e-vapor, Nu Mark LLC grew MarkTen’s full-year volume by
approximately 60%, primarily through expanded distribution and
category growth. MarkTen had a full-year 2017 national retail share
of 12.5% in mainstream retail channels and is present in stores
representing approximately 70% of e-vapor category volume in those
channels. MarkTen Bold is now available in approximately 25,000
retail stores.
In heated tobacco, Philip Morris USA Inc. (PM USA) continues to
build its commercialization plans for IQOS, which it will have the
exclusive right to sell in the U.S. upon FDA authorization.
U.S. Corporate Tax
Reform
On December 22, 2017, the U.S. Government enacted comprehensive
tax legislation commonly referred to as the Tax Cuts and Jobs Act
(Tax Reform Act) which, among other things, reduced the U.S.
federal statutory corporate income tax rate to 21%, effective
January 1, 2018.
The Tax Reform Act affected both Altria’s 2017 full-year
reported effective tax rate and its 2017 full-year adjusted
effective tax rate.
For the reported effective tax rate, Altria revalued its
existing net deferred tax liabilities to reflect the lower rate.
The Tax Reform Act also imposed a one-time deemed repatriation tax,
substantially all of which is related to Altria’s share of
accumulated earnings from its beer investment (Deemed Repatriation
Tax). The effect of these items (Tax Reform Items) reduced Altria’s
fourth-quarter and full-year reported effective tax rates, as
detailed in Schedule 10.
For the adjusted effective tax rate, the Deemed Repatriation Tax
covered historical earnings from Altria’s beer investment through
2017. As a result, no tax was due on the dividends Altria received
from AB InBev during 2017, and Altria’s 2017 full-year adjusted
effective tax rate decreased to 33.4% from Altria’s previous
estimate of approximately 35.5%. This decrease provided an
approximate $0.10 per share benefit to 2017 full-year adjusted
diluted EPS. Altria expects to continue to receive favorable tax
treatment on dividends it receives from AB InBev.
A reconciliation of Altria’s 2017 full-year reported effective
tax rate to its 2017 full-year adjusted effective tax rate is shown
on Schedule 10.
For Altria’s expected 2018 full-year adjusted effective tax
rate, refer to “2018 Full-Year Guidance” below.
Facilities Consolidation
In October 2016, Altria announced the consolidation of certain
of its operating companies’ manufacturing facilities to streamline
operations and achieve greater efficiencies (Facilities
Consolidation). The Facilities Consolidation is expected to be
substantially completed by the end of the first quarter of 2018 and
deliver approximately $50 million in annualized cost savings by the
end of 2018.
As a result of the Facilities Consolidation, Altria recorded
total pre-tax charges of approximately $150 million, including $71
million in 2016 and $78 million for the full year 2017, including
$7 million in the fourth quarter.
2018 Full-Year Guidance
Altria forecasts 2018 full-year adjusted diluted EPS to be in a
range of $3.90 to $4.03, which excludes a $0.09 tax expense for a
tax basis adjustment related to the Deemed Repatriation Tax. This
range represents a growth rate of 15% to 19% from a 2017 adjusted
diluted EPS base of $3.39, which excludes the special items shown
in Table 2. 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 expects capital expenditures in a range of $200 million
to $250 million and depreciation and amortization expenses of
approximately $210 million.
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 on AB InBev/SABMiller business combination, AB
InBev/SABMiller 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.
Altria reports its financial results in accordance with GAAP.
Altria’s management reviews operating companies income (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, operating margins and diluted EPS on an adjusted
basis, which excludes certain income and expense items, including
those items noted under “2018 Full-Year Guidance” above. 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, but does impact
the year-over-year comparability of Altria’s equity earnings from
its beer investment and reported and adjusted diluted EPS in the
short term.
Altria’s reportable segments are smokeable products,
manufactured and sold by PM USA, John Middleton Co. (Middleton) and
Sherman Group Holdings, LLC and its subsidiaries (Nat Sherman);
smokeless products, manufactured and sold by U.S. Smokeless Tobacco
Company LLC (USSTC); and wine, produced and/or distributed by Ste.
Michelle Wine Estates Ltd. (Ste. Michelle).
Comparisons are to the corresponding prior-year period unless
otherwise stated.
Altria’s 2017 fourth-quarter net revenues decreased 2.4% to $6.1
billion, primarily driven by lower net revenues in the smokeable
products segment. Altria’s revenues net of excise taxes were
essentially unchanged at $4.7 billion. For the full year, net
revenues decreased 0.7% to $25.6 billion, and revenues net of
excise taxes increased 0.8% to $19.5 billion.
Altria’s 2017 fourth-quarter reported diluted EPS decreased
50.7% to $2.60, primarily driven by the 2016 gain on the AB
InBev/SABMiller business combination, partially offset by lower
reported taxes, higher reported OCI in the smokeable and smokeless
products segments and fewer shares outstanding. Altria’s
fourth-quarter adjusted diluted EPS, which excludes the special
items shown in Table 1, grew 33.8% to $0.91, primarily driven by
higher equity earnings from Altria’s beer investment due to
reporting AB InBev’s results on a one-quarter lag, higher adjusted
OCI in the smokeable and smokeless products segments, a lower
adjusted effective tax rate and fewer shares outstanding.
Altria’s full-year 2017 reported diluted EPS decreased 27.1% to
$5.31, primarily driven by a lower gain on the AB InBev/SABMiller
business combination and lower equity earnings from Altria’s beer
investment, partially offset by lower reported taxes, the 2016 loss
on early extinguishment of debt, higher reported OCI in the
smokeable and smokeless products segments and fewer shares
outstanding. Altria’s full-year 2017 adjusted diluted EPS, which
excludes the special items shown in Table 1, increased 11.9% to
$3.39, primarily driven by higher adjusted OCI in the smokeable and
smokeless products segments, a lower adjusted effective tax rate
and fewer shares outstanding.
Table 1 - Altria’s
Adjusted Results
Fourth Quarter Full Year 2017
2016 Change 2017 2016 Change
Reported diluted EPS $ 2.60 $
5.27 (50.7 )% $ 5.31 $
7.28 (27.1 )% NPM Adjustment Items — — — 0.01
Tobacco and health litigation items 0.02 0.01 0.03 0.04 AB
InBev/SABMiller special items 0.02 (0.07 ) 0.05 (0.03 ) Loss on
early extinguishment of debt — — — 0.28 Asset impairment, exit,
implementation and acquisition-related costs — 0.03 0.03 0.07
Patent litigation settlement — 0.01 — 0.01 Gain on AB
InBev/SABMiller business combination — (4.56 ) (0.15 ) (4.61 )
Settlement charge for lump sum pension payments 0.03 — 0.03 — Tax
items (1.76 ) (0.01 ) (1.91 ) (0.02 )
Adjusted diluted EPS
$ 0.91 $ 0.68 33.8
% $ 3.39 $ 3.03
11.9 %
Note: For details of pre-tax, tax and after-tax amounts, see
Schedules 7 and 9.
AB InBev/SABMiller Special
Items
In the fourth quarter of 2017, earnings from Altria’s equity
investment in AB InBev included net pre-tax charges of $51 million,
consisting primarily of Altria’s share of AB InBev’s Brazilian tax
item. In the fourth quarter of 2016, Altria recorded net pre-tax
income of $236 million related to SABMiller special items.
For the full year 2017, earnings from Altria’s equity investment
in AB InBev included net pre-tax charges of $160 million. For full
year 2016, earnings from Altria’s equity investment in SABMiller
included net pre-tax income of $89 million.
The EPS impact of these items is shown in Table 1 and Schedules
7 and 9.
Loss on Early Extinguishment of
Debt
In 2016, Altria completed a cash tender offer in which it
purchased approximately $933 million aggregate principal amount of
its senior unsecured 9.95% and 10.20% notes due in 2038 and 2039,
respectively. The transaction resulted in a one-time, pre-tax
charge against reported earnings of $823 million, reflecting the
loss on early extinguishment of debt.
The EPS impact of this charge is shown in Table 1 and Schedule
9.
Asset Impairment, Exit, Implementation
and Acquisition-related Costs
For the full year 2017, Altria recorded pre-tax charges of $89
million, primarily related to the Facilities Consolidation.
In the fourth quarter of 2016, Altria recorded pre-tax charges
of $73 million, primarily related to the Facilities Consolidation.
For the full year 2016, Altria recorded pre-tax charges of $206
million, primarily related to the productivity initiative announced
in January 2016 and the Facilities Consolidation.
The EPS impact of these charges is shown in Table 1 and
Schedules 7 and 9.
Gain on AB InBev/SABMiller Business
Combination
For the full year 2017, Altria recorded a pre-tax gain of $445
million related to AB InBev’s divestitures of certain SABMiller
assets and businesses in connection with the AB InBev/SABMiller
business combination.
In the fourth quarter and full-year 2016, Altria recorded
pre-tax gains of approximately $13.7 billion and $13.9 billion,
respectively, related to the AB InBev/SABMiller business
combination.
The EPS impact of these items is shown in Table 1 and Schedules
7 and 9.
Settlement Charge for Lump Sum Pension
Payments
In the fourth quarter of 2017, Altria recorded a one-time
pre-tax settlement charge of $81 million related to lump sum
payments made in connection with a voluntary, limited-time offer to
former employees with vested benefits in the Altria Retirement Plan
who had not commenced receiving benefit payments and met certain
other conditions.
The EPS impact of this charge is shown in Table 1 and Schedules
7 and 9.
Tax Items
In the fourth quarter of 2017, Altria recorded a $3.4 billion
tax benefit primarily related to Tax Reform Items described in
“U.S. Corporate Tax Reform” above.
For the full year 2017, Altria recorded $3.7 billion in income
tax benefits, primarily related to Tax Reform Items and the
previously disclosed valuation allowance release and federal income
tax audit closure.
The EPS impact of these items is shown in Table 1 and Schedules
7 and 9.
SMOKEABLE
PRODUCTS
The smokeable products segment delivered strong income growth in
the fourth quarter and for 2017.
Smokeable products segment net revenues declined 3.2% in the
fourth quarter as lower volume was partially offset by higher
pricing and lower promotional investments. For the full year,
smokeable products segment net revenues declined 0.9% as lower
volume and higher promotional investments were partially offset by
higher pricing. Revenues net of excise taxes declined 1.0% in the
quarter and increased 0.6% for the full year.
In the fourth quarter, reported OCI increased 1.7%, primarily
driven by higher pricing, lower selling, general and administrative
(SG&A) spending and lower promotional investments, partially
offset by lower volume, higher resolution expense and settlement
charges for lump sum pension payments. Adjusted OCI, which is
calculated excluding the special items identified in Table 2, grew
5.7%, and adjusted OCI margins expanded 3.2 percentage points to
49.9%.
For the full year, reported OCI increased 8.2%, primarily driven
by higher pricing and lower SG&A spending, partially offset by
lower volume. Adjusted OCI, which is calculated excluding the
special items identified in Table 2, grew 7.0%, and adjusted OCI
margins expanded 3.0 percentage points to 51.2%.
Table 2 - Smokeable Products:
Revenues and OCI ($ in millions)
Fourth Quarter Full Year
2017 2016 Change 2017 2016
Change Net revenues $ 5,281 $
5,453 (3.2)% $ 22,636 $
22,851 (0.9)% Excise taxes (1,346 ) (1,478 ) (5,927 )
(6,247 )
Revenues net of excise taxes $ 3,935
$ 3,975 (1.0)% $
16,709 $ 16,604 0.6%
Reported OCI $ 1,844 $
1,813 1.7% $ 8,408 $
7,768 8.2% NPM Adjustment Items — — (5 ) 12 Asset
impairment, exit, implementation and acquisition-related costs 7 29
29 134 Tobacco and health litigation items 56 16 72 88 Settlement
charge for lump sum pension payments 57 — 57 —
Adjusted OCI $ 1,964 $
1,858 5.7% $ 8,561
$ 8,002 7.0% Adjusted OCI
margins 1 49.9 % 46.7 %
3.2 pp 51.2 % 48.2 %
3.0 pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
In the fourth quarter, the smokeable products segment’s reported
domestic cigarettes shipment volume declined by 8.9%, primarily
driven by the industry’s rate of decline, trade inventory movements
and retail share declines. After adjusting for trade inventory
movements, PM USA’s domestic cigarettes shipment volume decreased
by an estimated 6.5%. Total cigarette industry volumes declined by
an estimated 4.5%.
For the full year, the smokeable products segment’s reported
domestic cigarettes shipment volume decreased by 5.1%, primarily
driven by the industry’s rate of decline, retail share declines and
one fewer shipping day. When adjusted for calendar differences, PM
USA’s domestic cigarettes shipment volume decreased by an estimated
5%. Total cigarette industry volumes declined by an estimated
4%.
The smokeable products segment’s reported cigars shipment volume
increased by 7.9% in the fourth quarter and 9.9% for the full year.
Table 3 summarizes smokeable products segment shipment volume
performance.
Table 3 - Smokeable Products:
Shipment Volume (sticks in millions)
Fourth Quarter Full Year
2017 2016 Change 2017 2016
Change Cigarettes: Marlboro 22,667 24,851
(8.8)% 99,974 105,297 (5.1)%
Other premium 1,400 1,524
(8.1)% 5,967 6,382 (6.5)%
Discount 2,415 2,682
(10.0)% 10,665 11,251 (5.2)%
Total cigarettes
26,482 29,057 (8.9)%
116,606 122,930 (5.1)%
Cigars: Black & Mild 381 351 8.5% 1,527 1,379
10.7%
Other 3 5 (40.0)% 15 24
(37.5)%
Total cigars 384 356
7.9% 1,542 1,403 9.9%
Total smokeable products
26,866 29,413 (8.7)%
118,148 124,333 (5.0)%
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.
In the fourth quarter, Marlboro’s retail share declined by 0.7
share points to 43.0%, primarily driven by competitive activity and
the continued effect of the cigarette excise tax increase in
California. For the full year, Marlboro’s retail share declined by
0.4 share points to 43.3%. PM USA’s total retail share was 50.3% in
the quarter and 50.7% for the full year, down 0.8 and 0.4 share
points, respectively. Table 4 summarizes cigarette retail share
results.
Table 4 - Smokeable Products:
Cigarettes Retail Share (percent)
Fourth Quarter Full Year
2017 2016
Percentagepoint change
2017 2016
Percentagepoint change
Cigarettes: Marlboro 43.0 % 43.7 % (0.7 ) 43.3 % 43.7
% (0.4 )
Other premium 2.7 2.7 — 2.7 2.8 (0.1 )
Discount 4.6 4.7 (0.1 ) 4.7 4.6
0.1
Total cigarettes 50.3 % 51.1
% (0.8 ) 50.7 % 51.1
% (0.4 )
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
The smokeless products segment delivered very strong results in
the fourth quarter and for 2017.
Smokeless products segment net revenues increased 10.4% in the
quarter, primarily driven by higher pricing and lower promotional
investments, partially offset by lower volume. For the full year,
smokeless product segment net revenues increased 5.1%, primarily
driven by higher pricing and lower promotional investments,
partially offset by unfavorable mix and lower volume. Revenues net
of excise taxes increased 11.1% in the quarter and 5.6% for the
full year.
In the fourth quarter, reported OCI increased 41.3%, primarily
driven by higher pricing, lower Facilities Consolidation charges,
lower costs (SG&A and manufacturing) and lower promotional
investments, partially offset by settlement charges for lump sum
pension payments. Adjusted OCI, which is calculated excluding the
special items identified in Table 5, increased 27.2%, and adjusted
OCI margins increased 8.7 percentage points to 68.1%.
For the full year, reported OCI increased 10.5%, primarily
driven by higher pricing and lower costs partially offset by
unfavorable mix and lower volume. Adjusted OCI, which is calculated
excluding the special items identified in Table 5, increased 11.2%,
and adjusted OCI margins increased 3.4 percentage points to
67.8%.
Table 5 - Smokeless Products:
Revenues and OCI ($ in millions)
Fourth Quarter Full Year
2017 2016 Change 2017 2016
Change Net revenues $ 575 $
521 10.4% $ 2,155 $ 2,051
5.1% Excise taxes (33 ) (33 ) (132 ) (135 )
Revenues net
of excise taxes $ 542 $ 488
11.1% $ 2,023 $
1,916 5.6% Reported OCI $
349 $ 247 41.3% $ 1,300
$ 1,177 10.5% Asset impairment, exit and
implementation costs 4 43 56 57 Settlement charge for lump sum
pension payments 16 — 16 —
Adjusted
OCI $ 369 $ 290
27.2% $ 1,372 $ 1,234
11.2% Adjusted OCI margins 1
68.1 % 59.4 % 8.7 pp
67.8 % 64.4 % 3.4 pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
In the fourth quarter, the smokeless products segment’s reported
domestic shipment volume declined 0.6%. After adjusting for trade
inventory movements and other factors, USSTC estimates that its
domestic smokeless products shipment volume declined approximately
2.5%.
For the full year, reported domestic shipment volume declined
1.4%, driven primarily by declines in Skoal. After adjusting for
trade inventory movements and other factors, USSTC estimates that
its domestic smokeless products shipment volume declined
approximately 2%. USSTC estimates that the smokeless products
category volume was essentially unchanged over the past six
months.
Table 6 summarizes shipment volume performance for the smokeless
products segment.
Table 6 - Smokeless Products: Shipment
Volume(cans and packs in millions)
Fourth
Quarter Full Year 2017 2016 Change
2017 2016 Change Copenhagen 135.5 132.8
2.0% 531.6 525.1 1.2%
Skoal 58.9 63.6 (7.4)%
241.9 260.9 (7.3)%
Copenhagen and Skoal
194.4 196.4 (1.0)% 773.5 786.0
(1.6)% Other 17.5 16.7 4.8% 67.8
67.5 0.4%
Total smokeless products 211.9
213.1 (0.6)% 841.3
853.5 (1.4)%
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.
In the fourth quarter, Copenhagen retail share was unchanged at
33.8%. Copenhagen and Skoal’s combined retail share decreased 1.3
share points in the quarter to 50.1% driven by Skoal.
For the full year, Copenhagen’s 0.5 share point growth was
offset by Skoal’s 1.4 share point loss, contributing to a combined
share decline of 0.9 share points. Table 7 summarizes retail share
results for the smokeless products segment.
Table 7
- Smokeless Products: Retail Share (percent)
Fourth Quarter Full Year 2017 2016
Percentagepoint change
2017 2016
Percentagepoint change
Copenhagen 33.8 % 33.8 % —
33.7
%
33.2
%
0.5
Skoal 16.3 17.6 (1.3 ) 16.7
18.1 (1.4 )
Copenhagen and Skoal
50.1 51.4 (1.3 ) 50.4
51.3 (0.9 ) Other 3.5 3.3
0.2 3.3 3.4 (0.1 )
Total
smokeless products 53.6 % 54.7 %
(1.1 ) 53.7 % 54.7
% (1.0 )
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
In the wine segment, Ste. Michelle’s fourth-quarter and
full-year results were negatively impacted by competitive activity,
continued trade inventory reductions and slower premium wine
category growth.
In the fourth quarter of 2017, Ste. Michelle’s net revenues
declined 8.5%. Reported and adjusted OCI increased 1.6%, primarily
due to lower costs, higher pricing and favorable mix, mostly offset
by lower volume. Reported wine shipment volume for the fourth
quarter declined 9.7% to approximately 2.8 million cases.
For the full year, Ste. Michelle’s net revenues declined 6.4%.
Reported OCI declined 10.4% and adjusted OCI declined 12.0%,
primarily due to lower volume. Reported shipment volume for the
full year declined 8.6% to approximately 8.5 million cases.
Table 8 summarizes revenues, OCI and OCI margins for the wine
segment.
Table 8 - Wine:
Revenues and OCI ($ in millions)
Fourth Quarter Full Year
2017 2016 Change 2017 2016
Change Net revenues $ 227 $
248 (8.5)% $ 698 $ 746
(6.4)% Excise taxes (8 ) (8 ) (23 ) (25 )
Revenues net of
excise taxes $ 219 $ 240
(8.8)% $ 675 $ 721
(6.4)% Reported OCI $ 65
$ 64 1.6% $ 147 $
164 (10.4)% Acquisition-related costs — —
— 3
Adjusted OCI $ 65
$ 64 1.6% $ 147
$ 167 (12.0)% Adjusted OCI
margins 1 29.7 % 26.7 %
3.0 pp 21.8 % 23.2 %
(1.4) pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
Altria’s Profile
Altria’s wholly-owned subsidiaries include Philip Morris USA
Inc., U.S. Smokeless Tobacco Company LLC, John Middleton Co.,
Sherman Group Holdings, LLC and its subsidiaries, Nu Mark LLC, Ste.
Michelle Wine Estates Ltd. and Philip Morris Capital Corporation.
Altria holds an equity investment in Anheuser-Busch InBev
SA/NV.
The brand portfolios of Altria’s tobacco operating companies
include Marlboro®, Black & Mild®,
Copenhagen®, Skoal®, MarkTen® and Green
Smoke®. Ste. Michelle produces and markets premium wines
sold under various labels, including Chateau Ste. Michelle®,
Columbia Crest®, 14 Hands® and Stag’s Leap Wine
Cellars™, and it imports and markets Antinori®,
Champagne Nicolas Feuillatte™, Torres® and Villa
Maria Estate™ products in the United States. Trademarks and
service marks related to Altria referenced in this release are the
property of Altria or its subsidiaries or are used with permission.
More information about Altria is available at altria.com and on the
Altria Investor app.
Forward-Looking and Cautionary
Statements
This press release contains projections of future results and
other forward-looking statements that involve a number of risks and
uncertainties and are made pursuant to the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995.
Important factors that may cause actual results and outcomes to
differ materially from those contained in the projections and
forward-looking statements included in this press release are
described in Altria’s publicly filed reports, including its Annual
Report on Form 10-K for the year ended December 31, 2016 and its
Quarterly Report on Form 10-Q for the period ended September 30,
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: AB InBev’s inability to achieve the
contemplated synergies and value creation from its business
combination with SABMiller; 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 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 the dividends
Altria expects to receive from 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 December 31,(dollars in millions, except per share
data)(Unaudited)
2017 2016 % Change Net
revenues $ 6,101 $ 6,252
(2.4)% Cost of sales 1 1,844 1,905 Excise taxes on products
1 1,387 1,519 Gross profit 2,870 2,828 1.5%
Marketing, administration and research costs 623 701 Asset
impairment and exit costs 9 56
Operating companies
income 2,238 2,071 8.1% Amortization of
intangibles 6 6 General corporate expenses 69 72
Operating income 2,163 1,993 8.5%
Interest and other debt expense, net 180 176 Earnings from equity
investment in AB InBev/SABMiller (200 ) (231 ) Gain on AB
InBev/SABMiller business combination — (13,660 ) Earnings
before income taxes 2,183 15,708 (86.1)% (Benefit) provision for
income taxes (2,785 ) 5,430
Net earnings 4,968
10,278 (51.7)% Net earnings attributable to
noncontrolling interests (2 ) (2 )
Net earnings attributable to
Altria Group, Inc. $ 4,966 $
10,276 (51.7)% Per share data:
Basic and diluted earnings per share attributable to
Altria Group, Inc.
$ 2.60 $ 5.27 (50.7)%
Weighted-average diluted shares outstanding 1,905 1,946 (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 5.
Schedule 2
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data
For the Quarters Ended December 31,
(dollars in millions)
(Unaudited)
Net Revenues
SmokeableProducts
SmokelessProducts
Wine All Other
Total 2017 $ 5,281 $ 575 $ 227 $ 18 $ 6,101 2016 5,453 521
248 30 6,252 % Change
(3.2
)%
10.4 %
(8.5
)%
(40.0
)%
(2.4)%
Reconciliation:
For the quarter ended December 31, 2016 $
5,453 $ 521 $ 248 $
30 $ 6,252 Operations
(172
)
54
(21
)
(12
)
(151)
For the quarter ended December 31, 2017
$ 5,281 $ 575
$ 227 $ 18
$ 6,101
Operating
Companies Income (Loss)
SmokeableProducts
SmokelessProducts
Wine All Other
Total 2017 $ 1,844 $ 349 $ 65 $
(20
)
$ 2,238 2016 1,813 247 64
(53
)
2,071 % Change
1.7
%
41.3 %
1.6
%
(62.3
)%
8.1%
Reconciliation:
For the quarter ended December 31, 2016 $
1,813 $ 247 $ 64 $
(53) $ 2,071 Asset impairment, exit and
implementation
costs - 2016
29 43 — 1 73 Patent litigation settlement - 2016 — — — 21 21
Tobacco and health litigation items - 2016 16
— — — 16 45
43 — 22 110 Asset
impairment, exit, implementation and acquisition-related costs -
2017
(7
)
(4 ) — — (11) Tobacco and health litigation items - 2017
(56
)
— — — (56) Settlement charge for lump sum pension payments - 2017
(57
)
(16 ) — — (73)
(120
)
(20 ) — — (140)
Operations 106 79 1 11
197
For the quarter ended December 31, 2017
$ 1,844 $ 349
$ 65 $ (20)
$ 2,238
Schedule 3
ALTRIA GROUP, INC.
and Subsidiaries
Consolidated Statements of Earnings
For the Years Ended December 31,
(dollars in millions, except per share
data)
(Unaudited)
2017 2016 % Change
Net revenues $ 25,576 $ 25,744
(0.7)% Cost of sales 1 7,543 7,746 Excise taxes on products
1 6,082 6,407 Gross profit 11,951 11,591 3.1%
Marketing, administration and research costs 2,114 2,407 Asset
impairment and exit costs 33 174
Operating
companies income 9,804 9,010 8.8%
Amortization of intangibles 21 21 General corporate expenses 227
222 Corporate asset impairment and exit costs — 5
Operating income 9,556 8,762 9.1%
Interest and other debt expense, net 705 747 Loss on early
extinguishment of debt — 823 Earnings from equity investment in AB
InBev/SABMiller (532 ) (795 ) Gain on AB InBev/SABMiller business
combination (445 ) (13,865 ) Earnings before income taxes 9,828
21,852 (55.0)% (Benefit) provision for income taxes (399 ) 7,608
Net earnings 10,227 14,244
(28.2)% Net earnings attributable to noncontrolling
interests (5 ) (5 )
Net earnings attributable to Altria Group,
Inc. $ 10,222 $ 14,239
(28.2)% Per share data 2:
Basic and diluted earnings per share attributable
toAltria Group, Inc. $ 5.31 $
7.28 (27.1)% Weighted-average diluted shares
outstanding 1,921 1,952 (1.6)%
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 5.
2 Basic and diluted earnings per share attributable to Altria
Group, Inc. are computed independently for each period.
Accordingly, the sum of the quarterly earnings per share amounts
may not agree to the year-to-date amounts.
Schedule 4
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data
For the Years Ended December 31,
(dollars in millions)
(Unaudited)
Net Revenues
SmokeableProducts
SmokelessProducts
Wine All Other Total 2017 $
22,636 $ 2,155 $ 698 $ 87 $ 25,576 2016
22,851 2,051 746 96 25,744 % Change (0.9 )% 5.1 % (6.4 )% (9.4 )%
(0.7 )%
Reconciliation:
For the year ended December 31, 2016 $ 22,851
$ 2,051 $ 746 $ 96
$ 25,744 Operations (215 ) 104
(48 ) (9 ) (168 )
For the year ended December 31,
2017 $ 22,636 $
2,155 $ 698 $
87 $ 25,576
Operating
Companies Income (Loss)
SmokeableProducts
SmokelessProducts
Wine All Other Total 2017 $
8,408 $ 1,300 $ 147 $ (51 ) $ 9,804 2016 7,768 1,177 164 (99 )
9,010 % Change 8.2 % 10.5 % (10.4 )% 48.5 % 8.8 %
Reconciliation:
For the year ended December 31, 2016 $ 7,768
$ 1,177 $ 164 $ (99
) $ 9,010 NPM Adjustment Items - 2016
12 — — — 12 Asset impairment, exit, implementation and
acquisition-related costs - 2016 134 57 3 7 201 Patent litigation
settlement - 2016 — — — 21 21 Tobacco and health litigation items -
2016 88 — — —
88 234 57 3
28 322 NPM Adjustment Items - 2017 5 —
— — 5 Asset impairment, exit, implementation and
acquisition-related costs - 2017 (29 ) (56 ) — — (85 ) Tobacco and
health litigation items - 2017 (72 ) — — — (72 ) Settlement charge
for lump sum pension payments - 2017 (57 ) (16 ) —
— (73 ) (153 ) (72 ) —
— (225 ) Operations 559
138 (20 ) 20 697
For
the year ended December 31, 2017 $ 8,408
$ 1,300 $ 147
$ (51 ) $
9,804
Schedule 5
ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data
(dollars in millions)
(Unaudited)
For the Quarters Ended December
31, For the Years
Ended December 31,
2017 2016 2017 2016 The segment
detail of excise taxes on products sold is as follows:
Smokeable products $ 1,346 $ 1,478 $ 5,927 $ 6,247 Smokeless
products 33 33 132 135 Wine 8 8 23 25 $ 1,387
$ 1,519 $ 6,082 $ 6,407
The
segment detail of charges for resolution expenses related to state
settlement agreements included in cost of sales is as follows:
Smokeable products $ 1,035 $ 1,057 $ 4,451 $ 4,622 Smokeless
products 2 2 8 8 $ 1,037 $ 1,059
$ 4,459 $ 4,630
The segment detail of FDA
user fees included in cost of sales is
as follows:
Smokeable products $ 72 $ 70 $ 278 $ 281 Smokeless products
1 1 4 4 $ 73 $ 71 $ 282 $
285
Schedule 6
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per
Share - Attributable to Altria Group, Inc.
For the Quarters Ended December 31,
(dollars in millions, except per share
data)
(Unaudited)
Net Earnings Diluted
EPS 2017 Net Earnings $ 4,966
$ 2.60 2016 Net Earnings $
10,276 $ 5.27 % Change (51.7
)% (50.7 )%
Reconciliation:
2016 Net Earnings $ 10,276 $
5.27 2016 Tobacco and health litigation items 15 0.01
2016 SABMiller special items (153 ) (0.07 ) 2016 Asset impairment,
exit and implementation costs 51 0.03 2016 Patent litigation
settlement 13 0.01 2016 Gain on AB InBev/SABMiller business
combination (8,872 ) (4.56 ) 2016 Tax items (13 ) (0.01 ) Subtotal
2016 special items (8,959 ) (4.59 ) 2017 AB InBev special
items (34 ) (0.02 ) 2017 Asset impairment, exit, implementation and
acquisition-related costs (8 ) — 2017 Tobacco and health litigation
items (38 ) (0.02 ) 2017 Settlement charge for lump sum pension
payments (49 ) (0.03 ) 2017 Tax items 3,353 1.76
Subtotal 2017 special items 3,224 1.69 Fewer
shares outstanding — 0.01 Change in tax rate 119 0.06 Operations
306 0.16
2017 Net Earnings $
4,966 $ 2.60
Schedule 7
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and non-GAAP
Measures
For the Quarters Ended December 31,
(dollars in millions, except per share
data)
(Unaudited)
EarningsbeforeIncomeTaxes
(Benefit)Provisionfor
IncomeTaxes
NetEarnings
Net EarningsAttributable
toAltria Group, Inc.
DilutedEPS
2017 Reported $ 2,183 $
(2,785 ) $
4,968 $ 4,966
$ 2.60 AB InBev special items 51 17 34 34 0.02
Asset impairment, exit, implementation and
acquisition-related costs
12 4 8 8 — Tobacco and health litigation items 62 24 38 38 0.02
Settlement charge for lump sum pension payments 81 32 49 49 0.03
Tax items — 3,353
(3,353
)
(3,353
)
(1.76 )
2017 Adjusted for Special Items
$ 2,389 $ 645
$ 1,744
$ 1,742 $
0.91 2016 Reported $
15,708 $ 5,430 $ 10,278 $
10,276 $ 5.27 Tobacco and health litigation
items 17 2 15 15 0.01 SABMiller special items (236 ) (83 ) (153 )
(153 ) (0.07 ) Asset impairment, exit and implementation costs 73
22 51 51 0.03 Patent litigation settlement 21 8 13 13 0.01 Gain on
AB InBev/SABMiller business
combination
(13,660 ) (4,788 ) (8,872 ) (8,872 ) (4.56 ) Tax items —
13 (13 ) (13 )
(0.01 )
2016 Adjusted for Special Items $
1,923 $ 604
$ 1,319 $
1,317 $ 0.68
2017 Reported Net Earnings $
4,966 $ 2.60 2016 Reported Net Earnings
$ 10,276 $ 5.27 % Change
(51.7 )% (50.7 )% 2017 Net
Earnings Adjusted for Special Items $ 1,742
$ 0.91 2016 Net Earnings Adjusted for Special
Items $ 1,317 $ 0.68 %
Change 32.3 % 33.8 %
Schedule 8
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per
Share - Attributable to Altria Group, Inc.
For the Years Ended December 31,
(dollars in millions, except per share
data)
(Unaudited)
Net Earnings Diluted
EPS 1 2017 Net Earnings $
10,222 $ 5.31 2016 Net Earnings
$ 14,239 $ 7.28 % Change
(28.2 )% (27.1)%
Reconciliation:
2016 Net Earnings $ 14,239 $
7.28 2016 NPM Adjustment Items 11 0.01 2016 Tobacco
and health litigation items 71 0.04 2016 SABMiller special items
(57 ) (0.03) 2016 Loss on early extinguishment of debt 541 0.28
2016 Asset impairment, exit, implementation and acquisition-related
costs 135 0.07 2016 Patent litigation settlement 13 0.01 2016 Gain
on AB InBev/SABMiller business combination (9,001 ) (4.61) 2016 Tax
items (30 ) (0.02) Subtotal 2016 special items (8,317 ) (4.25)
2017 NPM Adjustment Items (2 ) — 2017 Tobacco and health
litigation items (50 ) (0.03) 2017 AB InBev special items (105 )
(0.05) 2017 Asset impairment, exit, implementation and
acquisition-related costs (55 ) (0.03) 2017 Gain on AB
InBev/SABMiller business combination 289 0.15 2017 Settlement
charge for lump sum pension payments (49 ) (0.03) 2017 Tax items
3,674 1.91 Subtotal 2017 special items 3,702 1.92
Fewer shares outstanding — 0.05 Change in tax rate 124 0.06
Operations 474 0.25
2017 Net Earnings $
10,222 $ 5.31
1 Diluted earnings per share attributable to Altria Group, Inc.
is computed independently for each period. Accordingly, the sum of
the quarterly earnings per share amounts may not agree to the
year-to-date amounts.
Schedule 9
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and non-GAAP
Measures
For the Years Ended December 31,
(dollars in millions, except per share
data)
(Unaudited)
EarningsbeforeIncomeTaxes
(Benefit)Provisionfor
IncomeTaxes
NetEarnings
Net EarningsAttributable
toAltria Group, Inc.
DilutedEPS
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 2016
Reported $ 21,852 $ 7,608 $
14,244 $ 14,239 $ 7.28 NPM
Adjustment Items 18 7 11 11 0.01 Tobacco and health litigation
items 105 34 71 71 0.04 SABMiller special items (89 ) (32 ) (57 )
(57 ) (0.03 ) Loss on early extinguishment of debt 823 282 541 541
0.28 Asset impairment, exit, implementation and
acquisition-related costs
206 71 135 135 0.07 Patent litigation settlement 21 8 13 13 0.01
Gain on AB InBev/SABMiller business
combination
(13,865 ) (4,864 ) (9,001 ) (9,001 ) (4.61 ) Tax items —
30 (30 ) (30 )
(0.02 )
2016 Adjusted for Special Items $
9,071 $ 3,144
$ 5,927 $
5,922 $ 3.03
2017 Reported Net Earnings $ 10,222
$ 5.31 2016 Reported Net Earnings $
14,239 $ 7.28 % Change (28.2
)% (27.1 )% 2017 Net Earnings
Adjusted for Special Items $ 6,520 $
3.39 2016 Net Earnings Adjusted for Special Items
$ 5,922 $ 3.03 % Change
10.1 % 11.9 %
Schedule 10
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and non-GAAP
Measures
For the Periods Ended December 31,
(Unaudited)
Fourth Quarter Full Year U.S. federal
statutory rate 35.0 % 35.0 % Increase (decrease) resulting from:
State and local income taxes, net of federal tax benefit 4.9 3.5
Re-measurement of net deferred tax liabilities (140.3 ) (31.2 ) Tax
basis in foreign investments (35.0 ) (7.8 ) Deemed repatriation tax
18.9 4.2 Uncertain tax positions (2.3 ) (0.9 ) AB InBev dividend
benefit (9.7 ) (5.9 ) Domestic manufacturing deduction (2.1 ) (1.8
) Other 3.0 0.8
Reported effective tax
rate 1 (127.6 )% (4.1
)% Tax reform items 154.2 34.3 Valuation allowance release —
2.4 IRS audit closure — 1.5 Other 0.4 (0.7 )
Adjusted effective tax rate 2 27.0 %
33.4 %
1 Reported effective tax rate is calculated as “(Benefit)
provision for income taxes” divided by “Earnings before income
taxes” from Schedules 1 and 3.
2 Adjusted effective tax rate is calculated as “Adjusted
provision for income taxes” divided by “Adjusted earnings before
income taxes” from Schedules 7 and 9.
Schedule 11
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in millions)
(Unaudited)
December 31, 2017 December 31,
2016
Assets
Cash and cash equivalents $ 1,253 $ 4,569 Inventories 2,225 2,051
Other current assets 866 640 Property, plant and equipment, net
1,914 1,958 Goodwill and other intangible assets, net 17,707 17,321
Investment in AB InBev 17,952 17,852 Finance assets, net 899 1,028
Other long-term assets 386 513
Total assets $
43,202 $ 45,932
Liabilities and
Stockholders’ Equity
Current portion of long-term debt $ 864 $ — Accrued settlement
charges 2,442 3,701 Other current liabilities 3,486 3,674 Long-term
debt 13,030 13,881 Deferred income taxes 5,247 8,416 Accrued
postretirement health care costs 1,987 2,217 Accrued pension costs
445 805 Other long-term liabilities 283 427 Total
liabilities 27,784 33,121 Redeemable noncontrolling interest 38 38
Total stockholders’ equity 15,380 12,773
Total
liabilities and stockholders’ equity $ 43,202
$ 45,932 Total debt $ 13,894 $ 13,881
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