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Section 1: 8-K (FORM 8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________________________________________________________________________________
FORM 8-K
________________________________________________________________________________________________________________
 CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 26, 2018
________________________________________________________________________________________________________________
ALTRIA GROUP, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________________________________________________
 
 
 
 
 
Virginia
  
1-08940
  
13-3260245
(State or other jurisdiction
of incorporation)
  
(Commission File Number)
  
(I.R.S. Employer
Identification No.)
 
 
6601 West Broad Street, Richmond, Virginia        
23230
(Address of principal executive offices)        
(Zip Code)
Registrant’s telephone number, including area code: (804) 274-2200
________________________________________________________________________________________________________________
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Item 2.02.    Results of Operations and Financial Condition.
On July 26, 2018, Altria Group, Inc. issued an earnings press release announcing its financial results for the quarter ended June 30, 2018. A copy of the earnings press release is attached as Exhibit 99.1 and is incorporated by reference in this Current Report on Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in Item 2.02 of this Current Report on Form 8-K shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
Item 9.01.    Financial Statements and Exhibits.
(d)
Exhibits
 
 
 
 
 
 
99.1

 




2




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
                    
 
ALTRIA GROUP, INC.
 
 
 
 
By:
/s/ W. HILDEBRANDT SURGNER, JR.
 
Name:
W. Hildebrandt Surgner, Jr.
 
Title:
Vice President, Corporate Secretary and
 
 
Associate General Counsel
                        

DATE:    July 26, 2018


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Section 2: EX-99.1 (ALTRIA GROUP, INC. EARNINGS PRESS RELEASE, DATED JULY 26, 2018)

Exhibit


Exhibit 99.1
394368231_altriamosaica08.jpg


ALTRIA REPORTS 2018 SECOND-QUARTER AND FIRST-HALF RESULTS;
TIGHTENS 2018 FULL-YEAR EARNINGS GUIDANCE


RICHMOND, Va. - July 26, 2018 - Altria Group, Inc. (Altria) (NYSE: MO) today announced its 2018 second-quarter and first-half business results and tightened its guidance for 2018 full-year adjusted diluted earnings per share (EPS).

“We continued our strong start to the year with adjusted diluted earnings per share growth of 18.8% in the second quarter. Our core tobacco businesses performed well as they continued to make strategic investments in support of their long-term objectives. Of course, our results benefited from a lower corporate tax rate,” said Howard Willard, Altria’s Chairman and Chief Executive Officer. “We continued to reward shareholders in the quarter by paying out over $1.3 billion in dividends and repurchasing approximately $437 million in shares.”
“To reflect a strong first half and continued confidence in our core tobacco businesses, we are raising the lower-end of our guidance and now expect full-year adjusted diluted EPS growth of 16% to 19%.”

As previously announced, a conference call with the investment community and news media will be webcast on July 26, 2018 at 9:00 a.m. Eastern Time. Access to the webcast is available at www.altria.com/webcasts and via the Altria Investor app.

Altria Headline Financials1
($ in millions, except per share data)
Q2 2018
Change vs.
Q2 2017
 
First Half 2018
Change vs.
First Half 2017
Net revenues
$6,305
(5.4)%
 
$12,413
(2.6)%
Revenues net of excise taxes
$4,879
(3.7)%
 
$9,549
(1.1)%
Tax rate:
Reported tax rate
26.6%
(5.0) pp
 
24.9%
(7.3) pp
Adjusted tax rate
22.9%
(12.6) pp
 
23.1%
(12.5) pp
Per share data:
Reported diluted EPS
$0.99
(3.9)%
 
$1.99
13.7%
Adjusted diluted EPS
$1.01
18.8%
 
$1.96
24.1%
1 “Adjusted” financial measures presented in this release exclude the impact of special items. See “Basis of Presentation” for more information.

Cash Returns to Shareholders
Dividends:
Altria paid over $1.3 billion in dividends in the second quarter.
Altria’s current annualized dividend rate is $2.80 per share, representing an annualized dividend yield of 4.9% as of July 20, 2018.
Altria expects to maintain a dividend payout ratio target of approximately 80% of adjusted diluted EPS. Future dividend payments remain subject to the discretion of Altria’s Board of Directors (Board).

6601 West Broad Street, Richmond VA 23230



Share Repurchase Program:
Altria repurchased 7.6 million shares in the second quarter at an average price of $57.65, for a cost of approximately $437 million.
In May 2018, the Board authorized a $1 billion expansion to the previous $1 billion share repurchase program. 
As of June 30, 2018, Altria had slightly more than $1 billion remaining in the current $2 billion share repurchase program, which Altria expects to complete by the end of the second quarter of 2019. The timing of share repurchases depends upon marketplace conditions and other factors, and this program remains subject to the discretion of the Board.
Innovation
In pursuit of Altria’s aspiration to be the U.S. leader in authorized, non-combustible, reduced-risk products:
In May, Altria announced a new corporate structure to accelerate its innovation pipeline and maximize its core tobacco businesses.
USSTC submitted premarket tobacco product applications to the U.S. Food and Drug Administration (FDA) for VERVE Discs and VERVE Chews.
Nu Mark grew e-vapor volume by approximately 16% in the quarter, reflecting its expansion of MarkTen Elite to over 23,000 retail stores.
PM USA’s initial lead market plans for IQOS are ready to deploy upon FDA authorization.
Other Notable Events
In July, Altria submitted its comments for the three advance notices of proposed rulemaking (ANPRM) that were published by the FDA in the first quarter. The comments are available at www.altria.com.
2018 Full-Year Guidance
Altria tightens its guidance for 2018 full-year adjusted diluted EPS to be in a range of $3.94 to $4.03, representing a growth rate of 16% to 19% from an adjusted diluted EPS base of $3.39 in 2017 as shown in Schedule 10. This guidance range excludes the special items for the first half of 2018 shown in Table 1 and an additional $0.05 of tax expense resulting from the Tax Cuts and Jobs Act (Tax Reform Act) expected in the second half of 2018. This tax expense is related to a tax basis adjustment to Altria’s AB InBev investment. Altria’s 2018 guidance reflects investments in focus areas for long-term growth, including innovative product development and launches, regulatory science, brand equity, retail fixtures and future retail concepts.

Altria expects its 2018 full-year adjusted effective tax rate will be in a range of approximately 23% to 24%.

Altria’s full-year adjusted diluted EPS guidance and full-year forecast for its adjusted effective tax rate exclude the impact of certain income and expense items that management believes are not part of underlying operations. These items may include, for example, loss on early extinguishment of debt, restructuring charges, gain/loss on AB InBev/SABMiller business combination, AB InBev special items, certain tax items, charges associated with tobacco and health litigation items, and resolutions of certain non-participating manufacturer (NPM) adjustment disputes under the Master Settlement Agreement (such dispute resolutions are referred to as NPM Adjustment Items).
Altria’s management cannot estimate on a forward-looking basis the impact of certain income and expense items, including those items noted in the preceding paragraph, on its reported diluted EPS and its reported effective tax rate because these items, which could be significant, may be infrequent, are difficult to predict and may be highly variable. As a result, Altria does not provide a corresponding U.S. generally accepted accounting principles (GAAP) measure for, or reconciliation to, its adjusted diluted EPS guidance or its adjusted effective tax rate forecast.
The factors described in the “Forward-Looking and Cautionary Statements” section of this release represent continuing risks to Altria’s forecast.

2


ALTRIA GROUP, INC.

See "Basis of Presentation" for an explanation of financial measures and reporting segments discussed in this release. Altria uses the equity method of accounting for its investment in AB InBev and reports its share of AB InBev’s results using a one-quarter lag.
Financial Performance
Second Quarter
Net revenues declined 5.4% to $6.3 billion, primarily due to lower net revenues in the smokeable products segment. Revenues net of excise taxes declined 3.7% to approximately $4.9 billion.
Reported diluted EPS decreased 3.9% to $0.99, primarily driven by the 2017 gain on the AB InBev/SABMiller business combination, higher investment spending in the innovative tobacco products businesses and lower reported operating companies income (OCI) in the smokeable products segment. These results were partially offset by lower income taxes, higher reported equity earnings from AB InBev (which included AB InBev special items), fewer shares outstanding and higher reported OCI in the smokeless products segment.
Adjusted diluted EPS increased 18.8% to $1.01, primarily driven by lower income taxes and fewer shares outstanding, partially offset by lower adjusted OCI in the smokeable products segment and higher investment spending in the innovative tobacco products businesses.

First Half
Net revenues declined 2.6% to $12.4 billion, as lower net revenues in the smokeable products segment were partially offset by higher net revenues in the smokeless products segment. Revenues net of excise taxes declined 1.1% to approximately $9.5 billion.
Reported diluted EPS increased 13.7% to $1.99, primarily driven by lower income taxes, higher reported equity earnings from AB InBev (which included AB InBev special items), fewer shares outstanding and higher reported OCI in the smokeless products segment. These results were partially offset by the 2017 gain on the AB InBev/SABMiller business combination, higher investment spending in the innovative tobacco products businesses and lower reported OCI in the smokeable products segment.
Adjusted diluted EPS increased 24.1% to $1.96, primarily driven by lower income taxes, higher adjusted equity earnings from AB InBev, fewer shares outstanding and higher adjusted OCI in the smokeless products segment, partially offset by lower adjusted OCI in the smokeable products segment and higher investment spending in the innovative tobacco products businesses.

Table 1 - Altria’s Adjusted Results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Six Months Ended June 30,
 
2018
2017
Change
 
2018
2017
Change
Reported diluted EPS
$
0.99

$
1.03

(3.9
)%
 
$
1.99

$
1.75

13.7
%
NPM Adjustment Items
(0.03
)

 
 
(0.06
)

 
Asset impairment, exit and
implementation costs

0.01

 
 

0.02

 
Tobacco and health litigation items
0.03

0.01

 
 
0.04

0.01

 
AB InBev special items
(0.03
)

 
 
(0.07
)
0.03

 
(Gain) loss on AB InBev/SABMiller business combination

(0.14
)
 
 
0.01

(0.14
)
 
Tax items
0.05

(0.06
)
 
 
0.05

(0.09
)
 
Adjusted diluted EPS
$
1.01

$
0.85

18.8
 %
 
$
1.96

$
1.58

24.1
%
Note: For details of pre-tax, tax and after-tax amounts, see Schedules 7 and 9.


3


Special Items
The EPS impact of the following special items is shown in Table 1 and Schedules 7 and 9.
NPM Adjustment Items
In the second quarter of 2018, Altria recorded pre-tax income of $77 million (or $0.03 per share) for an NPM adjustment settlement with Pennsylvania.
In the first half of 2018, Altria recorded pre-tax income of $145 million (or $0.06 per share) for NPM adjustment settlements with ten states.
Tobacco & Health Litigation Items
In the second quarter and first half of 2018, Altria recorded pre-tax charges of $70 million (or $0.03 per share) and $98 million (or $0.04 per share), respectively, for tobacco and health litigation items and related interest costs.
AB InBev Special Items
In the second quarter of 2018, equity earnings from AB InBev included net pre-tax income of $72 million (or $0.03 per share), consisting primarily of gains related to AB InBev’s merger and acquisition activities, partially offset by Altria’s share of AB InBev’s mark-to-market losses on AB InBev’s derivative financial instruments used to hedge certain share commitments.
In the first half of 2018, equity earnings from AB InBev included net pre-tax income of $189 million (or $0.07 per share), consisting primarily of Altria’s share of AB InBev’s estimated effect of the Tax Reform Act, and gains related to AB InBev’s merger and acquisition activities, partially offset by Altria’s share of AB InBev’s mark-to-market losses on AB InBev’s derivative financial instruments used to hedge certain share commitments. In the first half of 2017, equity earnings from AB InBev included net pre-tax charges of $75 million (or $0.03 per share), consisting primarily of Altria’s share of AB InBev’s mark-to-market losses on AB InBev’s derivative financial instruments used to hedge certain share commitments.
Gain/(Loss) on AB InBev/SABMiller Business Combination
In the first half of 2018, Altria recorded a pre-tax loss of $33 million (or $0.01 per share) related to AB InBev’s divestitures of certain SABMiller assets and businesses in connection with the AB InBev/SABMiller business combination.
In the second quarter and first half of 2017, Altria recorded a pre-tax gain of $408 million (or $0.14 per share) related to AB InBev’s divestitures of certain SABMiller assets and businesses in connection with the AB InBev/SABMiller business combination.
Tax Items
In the second quarter and first half of 2018, Altria recorded income tax charges of approximately $95 million (or $0.05 per share) primarily related to a tax basis adjustment to Altria’s AB InBev investment and for a valuation allowance on foreign tax credit carryforwards that are not realizable.
In the second quarter and first half of 2017, Altria recorded income tax benefits of $108 million (or $0.06 per share) and $166 million (or $0.09 per share), respectively, primarily related to the effective settlement of the 2010-2013 Internal Revenue Service audit.

SMOKEABLE PRODUCTS

Revenues and OCI
Second Quarter
Net revenues declined 6.3%, as lower volume was partially offset by higher pricing and lower promotional investments. Revenues net of excise taxes declined 4.8%.
Reported OCI declined 1.0%, as lower volume and higher tobacco and health litigation items were partially offset by higher pricing, lower promotional investments and NPM Adjustment Items.

4


Adjusted OCI declined 2.8%, primarily driven by lower volume, partially offset by higher pricing and lower promotional investments. Adjusted OCI margins increased 1.1 percentage points to 52.6%.
First Half
Net revenues declined 3.7%, as lower volume was partially offset by higher pricing and lower promotional investments. Revenues net of excise taxes declined 2.3%.
Reported OCI declined 0.5%, as lower volume, higher costs (including higher tobacco and health litigation items and investments in strategic initiatives) and higher resolution expenses were partially offset by higher pricing, higher NPM Adjustment Items and lower promotional investments.
Adjusted OCI declined 2.4%, primarily driven by lower volume, higher costs (including investments in strategic initiatives) and higher resolution expenses, partially offset by higher pricing and lower promotional investments. Adjusted OCI margins were unchanged at 51.2%.
Table 2 - Smokeable Products: Revenues and OCI ($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Six Months Ended June 30,
 
2018
2017
Change
 
2018
2017
Change
Net revenues
$
5,546

$
5,922

(6.3
)%
 
$
10,960

$
11,380

(3.7
)%
Excise taxes
(1,388
)
(1,556
)
 
 
(2,789
)
(3,016
)
 
Revenues net of excise taxes
$
4,158

$
4,366

(4.8
)%
 
$
8,171

$
8,364

(2.3
)%
 
 
 
 
 
 
 
 
Reported OCI
$
2,201

$
2,224

(1.0
)%
 
$
4,239

$
4,260

(0.5
)%
NPM Adjustment Items
(77
)

 
 
(145
)
(8
)
 
Asset impairment, exit, implementation and acquisition-related costs
2

9

 
 
3

15

 
Tobacco and health litigation items
60

15

 
 
84

16

 
Adjusted OCI
$
2,186

$
2,248

(2.8
)%
 
$
4,181

$
4,283

(2.4
)%
Adjusted OCI margins 1
52.6
%
51.5
%
1.1 pp

 
51.2
%
51.2
%

1 Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Shipment Volume
Second Quarter
Smokeable products segment reported domestic cigarette shipment volume declined 10.8%, primarily driven by trade inventory movements, the industry’s rate of decline and retail share losses.
When adjusted for trade inventory movements, smokeable products segment domestic cigarette shipment volume decreased by an estimated 5%.
Total domestic cigarette industry volumes declined by an estimated 3.5%.
Reported cigar shipment volume increased 2.7%.
First Half
Smokeable products segment reported domestic cigarette shipment volume declined 7.6%, primarily driven by the industry’s rate of decline, trade inventory movements and retail share losses.
When adjusted for trade inventory movements, smokeable products segment domestic cigarette shipment volume decreased by an estimated 5.5%.
Total domestic cigarette industry volumes declined by an estimated 4.5%.
Reported cigar shipment volume increased 2.8%.


5


Table 3 - Smokeable Products: Shipment Volume (sticks in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Six Months Ended June 30,
 
2018
2017
Change
 
2018
2017
Change
Cigarettes:
 
 
 
 
 
 
 
Marlboro
23,529

26,157

(10.0
)%
 
47,182

50,852

(7.2
)%
Other premium
1,404

1,550

(9.4
)%
 
2,813

3,000

(6.2
)%
Discount
2,333

2,862

(18.5
)%
 
4,793

5,444

(12.0
)%
Total cigarettes
27,266

30,569

(10.8
)%
 
54,788

59,296

(7.6
)%
 
 
 
 
 
 
 
 
Cigars:
 
 
 
 
 
 
 
Black & Mild
414

402

3.0
 %
 
789

765

3.1
 %
Other
3

4

(25.0
)%
 
6

8

(25.0
)%
Total cigars
417

406

2.7
 %
 
795

773

2.8
 %
 
 
 
 
 
 
 
 
Total smokeable products
27,683

30,975

(10.6
)%
 
55,583

60,069

(7.5
)%
Note: Cigarettes volume includes units sold as well as promotional units, but excludes units sold for distribution to Puerto Rico, and units sold in U.S. Territories, to overseas military and by Philip Morris Duty Free Inc., none of which, individually or in the aggregate, is material to the smokeable products segment.

Retail Share and Brand Activity
IRI refreshed its cigarette database in the first quarter of 2018, which affected previously released retail share results.
Second Quarter
Marlboro retail share declined 0.3 share points to 43.2%. Marlboro retail share was stable sequentially from the first quarter.
Smokeable products segment total cigarette retail share declined 0.7 share points to 50.2%, and declined 0.1 share point sequentially.
Nat Sherman expanded Nat’s into 13 additional states across the western U.S. in mid-June.
First Half
Marlboro retail share declined 0.4 share points to 43.2%, driven in part by continued effects from the April 2017 California state excise tax increase.
Smokeable products segment total cigarette retail share declined 0.8 share points to 50.2%.
Table 4 - Smokeable Products: Cigarettes Retail Share (percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Six Months Ended June 30,
 
2018
2017
Percentage point change
 
2018
2017
Percentage point change
Cigarettes:
 
 
 
 
 
 
 
Marlboro
43.2
%
43.5
%
(0.3
)
 
43.2
%
43.6
%
(0.4)
Other premium
2.6

2.7

(0.1
)
 
2.6

2.7

(0.1)
Discount
4.4

4.7

(0.3
)
 
4.4

4.7

(0.3)
Total cigarettes
50.2
%
50.9
%
(0.7
)
 
50.2
%
51.0
%
(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.




6


SMOKELESS PRODUCTS

Revenues and OCI
Second Quarter
Net revenues increased 2.7%, primarily driven by higher pricing partially offset by lower volume. Revenues net of excise taxes increased 2.8%.
Reported OCI increased 8.6%, primarily driven by higher pricing and lower asset impairment, exit and implementation costs, partially offset by lower volume.
Adjusted OCI increased 3.5%, primarily driven by higher pricing partially offset by lower volume. Adjusted OCI margins increased 0.5 percentage points to 69.9%.
First Half
Net revenues increased 7.2%, primarily driven by higher pricing and the impact of the 2017 voluntary recall, partially offset by lower volume. Revenues net of excise taxes increased 7.5%.
Reported OCI increased 20.6%, primarily driven by higher pricing, the impact of the 2017 voluntary recall and lower asset impairment, exit and implementation costs, partially offset by lower volume.
Adjusted OCI increased 13.5%, primarily driven by higher pricing and the impact of the 2017 voluntary recall, partially offset by lower volume. Adjusted OCI margins increased 3.8 percentage points to 69.5%.
Table 5 - Smokeless Products: Revenues and OCI ($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Six Months Ended June 30,
 
2018
2017
Change
 
2018
2017
Change
Net revenues
$
579

$
564

2.7
%
 
$
1,104

$
1,030

7.2
%
Excise taxes
(34
)
(34
)
 
 
(66
)
(64
)
 
Revenues net of excise taxes
$
545

$
530

2.8
%
 
$
1,038

$
966

7.5
%
 
 
 
 
 
 
 
 
Reported OCI
$
377

$
347

8.6
%
 
$
715

$
593

20.6
%
Asset impairment, exit and implementation costs
4

21

 
 
6

42

 
Adjusted OCI
$
381

$
368

3.5
%
 
$
721

$
635

13.5
%
Adjusted OCI margins 1
69.9
%
69.4
%
0.5 pp

 
69.5
%
65.7
%
3.8 pp

1 Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Shipment Volume
Second Quarter
Smokeless products segment reported domestic shipment volume declined 2.4% primarily driven by the industry’s rate of decline and retail share losses. Adjusted shipment volume comparisons are not provided due to the unusual effects of the 2017 recall.
First Half
Smokeless products segment reported domestic shipment volume declined 1.3% primarily driven by the industry’s rate of decline. When adjusted for calendar differences, the smokeless products segment shipment volume declined approximately 1.5%.
The smokeless industry volume declined an estimated 1% over the past six months.


7


Table 6 - Smokeless Products: Shipment Volume (cans and packs in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Six Months Ended June 30,
 
2018
2017
Change
 
2018
2017
Change
Copenhagen
138.1

137.5

0.4
 %
 
262.5

262.0

0.2
 %
Skoal
59.8

65.8

(9.1
)%
 
114.8

121.4

(5.4
)%
Copenhagen and Skoal
197.9

203.3

(2.7
)%
 
377.3

383.4

(1.6
)%
Other
17.8

17.7

0.6
 %
 
34.1

33.4

2.1
 %
Total smokeless products
215.7

221.0

(2.4
)%
 
411.4

416.8

(1.3
)%
Note: Volume includes cans and packs sold, as well as promotional units, but excludes international volume, which is not material to the smokeless products segment. New types of smokeless products, as well as new packaging configurations of existing smokeless products, may or may not be equivalent to existing moist smokeless tobacco (MST) products on a can-for-can basis. To calculate volumes of cans and packs shipped, one pack of snus, irrespective of the number of pouches in the pack, is assumed to be equivalent to one can of MST.

Retail Share and Brand Activity
IRI refreshed its smokeless products database in the first quarter of 2018, which affected previously released retail share results.
Second Quarter
Copenhagen retail share was unchanged at 34.3% and Skoal retail share declined 0.4 share points to 16.4%.
Copenhagen and Skoal combined retail share decreased 0.4 share points to 50.7%.
Smokeless products segment total retail share declined 0.2 share points to 54.1%.
First Half
Copenhagen retail share grew 0.5 share points to 34.3% and Skoal retail share declined 0.7 share points to 16.3%.
Copenhagen and Skoal combined retail share decreased 0.2 share points to 50.6%.
Smokeless products segment total retail share was unchanged at 54.0%.
Table 7 - Smokeless Products: Retail Share (percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Six Months Ended June 30,
 
2018
2017
Percentage point change
 
2018
2017
Percentage point change
Copenhagen
34.3
%
34.3
%
 
34.3
%
33.8
%
0.5
Skoal
16.4

16.8

(0.4)
 
16.3

17.0

(0.7)
Copenhagen and Skoal
50.7

51.1

(0.4)
 
50.6

50.8

(0.2)
Other
3.4

3.2

0.2
 
3.4

3.2

0.2
Total smokeless products
54.1
%
54.3
%
(0.2)
 
54.0
%
54.0
%
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.







8




WINE

Second Quarter
Net revenues increased 10.7%, primarily driven by favorable mix and higher shipment volume.
Reported and adjusted OCI increased 8.0%, primarily driven by higher volume and favorable mix, partially offset by increased costs.
Reported wine shipment volume grew 6.3% to approximately 1.9 million cases.
First Half
Net revenues increased 6.2%, primarily driven by higher shipment volume.
Reported and adjusted OCI declined 4.3%, primarily driven by higher costs, including one-time employee bonuses, partially offset by higher shipment volume.
Reported wine shipment volume grew 6.2% to approximately 3.7 million cases.

Table 8 - Wine: Revenues and OCI ($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Six Months Ended June 30,
 
2018
2017
Change
 
2018
2017
Change
Net revenues
$
166

$
150

10.7
%
 
$
308

$
290

6.2
 %
Excise taxes
(4
)
(5
)
 
 
(9
)
(9
)
 
Revenues net of excise taxes
$
162

$
145

11.7
%
 
$
299

$
281

6.4
 %
 
 
 
 
 
 
 
 
Reported and Adjusted OCI
$
27

$
25

8.0
%
 
$
44

$
46

(4.3
)%
OCI margins 1
16.7
%
17.2
%
(0.5) pp

 
14.7
%
16.4
%
(1.7) pp

1 OCI margins are calculated as OCI divided by revenues net of excise taxes.




9



Altria's Profile
Altria’s wholly-owned subsidiaries include Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC), John Middleton Co. (Middleton), Sherman Group Holdings, LLC and its subsidiaries (Nat Sherman), Nu Mark LLC (Nu Mark), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital Corporation (PMCC). Altria holds an equity investment in Anheuser-Busch InBev SA/NV (AB InBev).
The brand portfolios of Altria’s tobacco operating companies include Marlboro®, Black & Mild®, Copenhagen®, Skoal®, VERVE®, MarkTen® and Green Smoke®. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle®, Columbia Crest®, 14 Hands® and Stag’s Leap Wine Cellars, and it imports and markets Antinori®, Champagne Nicolas Feuillatte, Torres® and Villa Maria Estate products in the United States. Trademarks and service marks related to Altria referenced in this release are the property of Altria or its subsidiaries or are used with permission. More information about Altria is available at altria.com and on the Altria Investor app.
Basis of Presentation
Altria reports its financial results in accordance with GAAP. Altria’s management reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, the segments. Altria’s management also reviews OCI, OCI margins and diluted EPS on an adjusted basis, which excludes certain income and expense items, including those items noted under “2018 Full-Year Guidance.” Altria’s management does not view any of these special items to be part of Altria’s underlying results as they may be highly variable, may be infrequent, are difficult to predict and can distort underlying business trends and results. Altria’s management also reviews income tax rates on an adjusted basis. Altria’s adjusted effective tax rate may exclude certain tax items from its reported effective tax rate. Altria’s management believes that adjusted financial measures provide useful additional insight into underlying business trends and results and provide a more meaningful comparison of year-over-year results. Altria’s management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies. These adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. Reconciliations of historical adjusted financial measures to corresponding GAAP measures are provided in this release.
Altria uses the equity method of accounting for its investment in AB InBev and reports its share of AB InBev’s results using a one-quarter lag because AB InBev’s results are not available in time to record them in the concurrent period. The one-quarter reporting lag does not affect Altria’s cash flows.
Altria’s reportable segments are smokeable products, including combustible cigarettes and cigars manufactured and sold by PM USA, Middleton and Nat Sherman; smokeless products, including moist smokeless tobacco and snus products manufactured and sold by USSTC; and wine, produced and/or distributed by Ste. Michelle. Results for innovative tobacco products (including Nu Mark’s e-vapor products, VERVE and IQOS) and PMCC are included in “All Other.”
Comparisons are to the corresponding prior-year period unless otherwise stated.
Forward-Looking and Cautionary Statements
This release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Important factors that may cause actual results and outcomes to differ materially from those contained in the projections and forward-looking statements included in this press release are described in Altria’s publicly filed reports, including its Annual Report on Form 10-K for the year ended December 31, 2017 and its Quarterly Report on Form 10-Q for the period ended March 31, 2018. These factors include the following: significant competition;

10


changes in adult consumer preferences and demand for Altria’s operating companies’ products; fluctuations in raw material availability, quality and price; reliance on key facilities and suppliers; reliance on critical information systems, many of which are managed by third-party service providers; fluctuations in levels of customer inventories; the effects of global, national and local economic and market conditions; changes to income tax laws; federal, state and local legislative activity, including actual and potential federal and state excise tax increases; increasing marketing and regulatory restrictions; the effects of price increases related to excise tax increases and concluded tobacco litigation settlements, consumption rates and consumer preferences within price segments; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; privately imposed smoking restrictions; and, from time to time, governmental investigations.
Furthermore, the results of Altria’s tobacco businesses are dependent upon their continued ability to promote brand equity successfully; to anticipate and respond to evolving adult consumer preferences; to develop, manufacture, market and distribute products that appeal to adult tobacco consumers (including, where appropriate, through arrangements with, and investments in, third parties); to improve productivity; and to protect or enhance margins through cost savings and price increases.
Altria and its tobacco businesses are also subject to federal, state and local government regulation, including by the FDA. Altria and its subsidiaries continue to be subject to litigation, including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with the companies’ understanding of applicable law, bonding requirements in the limited number of jurisdictions that do not limit the dollar amount of appeal bonds and certain challenges to bond cap statutes.
In addition, the factors related to Altria’s investment in AB InBev include the following: the risk that Altria’s equity securities in AB InBev are subject to restrictions on transfer until October 10, 2021; the risk that Altria’s reported earnings from and carrying value of its equity investment in AB InBev and the dividends paid by AB InBev on shares owned by Altria may be adversely affected by unfavorable foreign currency exchange rates and other factors, including the risks encountered by AB InBev in its business; the risk that the tax treatment of Altria’s transaction consideration from the AB InBev/SABMiller business combination and the accounting treatment of its equity investment are not guaranteed; and the risk that the tax treatment of Altria’s investment in AB InBev may not be as favorable as Altria anticipates.
Altria cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statements that it may make except as required by applicable law. All subsequent written and oral forward-looking statements attributable to Altria or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above.

Source: Altria Group, Inc.

Altria Client Services         Altria Client Services
Investor Relations         Media Relations
804-484-8222             804-484-8897


11


 
 
Schedule 1
ALTRIA GROUP, INC.
and Subsidiaries
Consolidated Statements of Earnings
For the Quarters Ended June 30,
(dollars in millions, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
% Change
 
 
 
 
 
 
Net revenues
$
6,305

 
$
6,663

 
(5.4
)%
Cost of sales 1
1,738

 
1,954

 
 
Excise taxes on products 1
1,426

 
1,595

 
 
Gross profit
3,141

 
3,114

 
0.9
 %
Marketing, administration and research costs
591

 
514

 
 
Asset impairment and exit costs
2

 
12

 
 
Operating companies income 
2,548

 
2,588

 
(1.5
)%
Amortization of intangibles
5

 
5

 
 
General corporate expenses
45

 
55

 
 
Operating income 
2,498

 
2,528

 
(1.2
)%
Interest and other debt expense, net
178

 
177

 
 
Net periodic benefit income, excluding service cost
(9
)
 
(11
)
 
 
Earnings from equity investment in AB InBev
(228
)
 
(140
)
 
 
Gain on AB InBev/SABMiller business combination

 
(408
)
 
 
Earnings before income taxes
2,557

 
2,910

 
(12.1
)%
Provision for income taxes
680

 
920

 
 
Net earnings
1,877

 
1,990

 
(5.7
)%
Net earnings attributable to noncontrolling interests
(1
)
 
(1
)
 
 
Net earnings attributable to Altria
$
1,876

 
$
1,989

 
(5.7
)%
 
 
 
 
 
 
Per share data:
 
 
 
 
 
Basic and diluted earnings per share attributable to Altria
$
0.99

 
$
1.03

 
(3.9
)%
 
 
 
 
 
 
Weighted-average diluted shares outstanding
1,891

 
1,928

 
(1.9
)%
 
 
 
 
 
 
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.

    Note:  As a result of the January 1, 2018 adoption of Accounting Standards Update (“ASU”) No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU No. 2017-07”), certain immaterial prior-year amounts have been reclassified to conform with the current period’s presentation.
 




 
 
 
 
 
Schedule 2
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data
For the Quarters Ended June 30,
(dollars in millions)
(Unaudited)
 
 
 
 
 
 
 
Net Revenues
 
Smokeable Products
Smokeless Products
Wine
All Other
Total
2018
$
5,546

$
579

$
166

$
14

$
6,305

2017
5,922

564

150

27

6,663

% Change
(6.3
)%
2.7
%
10.7
%
(48.1
)%
(5.4
)%
 
 
 
 
 
 
Reconciliation:
 
 
 
 
 
For the quarter ended June 30, 2017
$
5,922

$
564

$
150

$
27

$
6,663

Operations
(376
)
15

16

(13
)
(358
)
For the quarter ended June 30, 2018
$
5,546

$
579

$
166

$
14

$
6,305

 
 
 
 
 
 
 
Operating Companies Income (Loss)
 
Smokeable Products
Smokeless Products
Wine
All Other
Total
2018
$
2,201

$
377

$
27

$
(57
)
$
2,548

2017
2,224

347

25

(8
)
2,588

% Change
(1.0
)%
8.6
%
8.0
%
(100.0)%+

(1.5
)%
 
 
 
 
 
 
Reconciliation:
 
 
 
 
 
For the quarter ended June 30, 2017
$
2,224

$
347

$
25

$
(8
)
$
2,588

 
 
 
 
 
 
Asset impairment, exit, implementation and acquisition-related costs - 2017
9

21



30

Tobacco and health litigation items - 2017
15




15

 
24

21



45

 
 
 
 
 
 
NPM Adjustment Items - 2018
77




77

Asset impairment, exit and implementation
    costs - 2018
(2
)
(4
)


(6
)
Tobacco and health litigation items - 2018
(60
)



(60
)
 
15

(4
)


11

Operations
(62
)
13

2

(49
)
(96
)
For the quarter ended June 30, 2018
$
2,201

$
377

$
27

$
(57
)
$
2,548

 
 
 
 
 
 
Note:  As a result of the January 1, 2018 adoption of ASU No. 2017-07, certain immaterial prior-year operating companies income (loss) amounts have been reclassified to conform with the current period’s presentation.




 
 
 
 
 
Schedule 3
ALTRIA GROUP, INC.
and Subsidiaries
Consolidated Statements of Earnings
For the Six Months Ended June 30,
(dollars in millions, except per share data)
(Unaudited)
 
 
 
 
 
 
 
2018
 
2017
 
% Change
 
 
 
 
 
 
Net revenues
$
12,413

 
$
12,746

 
(2.6
)%
Cost of sales 1
3,472

 
3,767

 
 
Excise taxes on products 1
2,864

 
3,089

 
 
Gross profit
6,077

 
5,890

 
3.2
 %
Marketing, administration and research costs
1,158

 
996

 
 
Asset impairment and exit costs
4

 
16

 
 
Operating companies income
4,915

 
4,878

 
0.8
 %
Amortization of intangibles
10

 
10

 
 
General corporate expenses
91

 
101

 
 
Operating income
4,814

 
4,767

 
1.0
 %
Interest and other debt expense, net
344

 
356

 
 
Net periodic benefit income, excluding service cost
(16
)
 
(19
)
 
 
Earnings from equity investment in AB InBev
(570
)
 
(163
)
 
 
Loss (gain) on AB InBev/SABMiller business combination
33

 
(408
)
 
 
Earnings before income taxes
5,023

 
5,001

 
0.4
 %
Provision for income taxes
1,251

 
1,609

 
 
Net earnings
3,772

 
3,392

 
11.2
 %
Net earnings attributable to noncontrolling interests
(2
)
 
(2
)
 
 
Net earnings attributable to Altria
$
3,770

 
$
3,390

 
11.2
 %
 
 
 
 
 
 
Per share data:
 
 
 
 
 
Basic and diluted earnings per share attributable to Altria
$
1.99

 
$
1.75

 
13.7
 %
 
 
 
 
 
 
Weighted-average diluted shares outstanding
1,895

 
1,933

 
(2.0
)%
 
 
 
 
 
 
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.
 
 
 
 
 
 
Note:  As a result of the January 1, 2018 adoption of ASU No. 2017-07, certain immaterial prior-year amounts have been reclassified to conform with the current period’s presentation.





 
 
 
 
 
Schedule 4
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data
For the Six Months Ended June 30,
(dollars in millions)
(Unaudited)
 
 
 
 
 
 
 
Net Revenues
 
Smokeable Products
Smokeless Products
Wine
All Other
Total
2018
$
10,960

$
1,104

$
308

$
41

$
12,413

2017
11,380

1,030

290

46

12,746

% Change
(3.7
)%
7.2
%
6.2
 %
(10.9
)%
(2.6
)%
 
 
 
 
 
 
Reconciliation:
 
 
 
 
 
For the six months ended June 30, 2017
$
11,380

$
1,030

$
290

$
46

$
12,746

Operations
(420
)
74

18

(5
)
(333
)
For the six months ended June 30, 2018
$
10,960

$
1,104

$
308

$
41

$
12,413

 
 
 
 
 
 
 
Operating Companies Income (Loss)
 
Smokeable Products
Smokeless Products
Wine
All Other
Total
2018
$
4,239

$
715

$
44

$
(83
)
$
4,915

2017
4,260

593

46

(21
)
4,878

% Change
(0.5
)%
20.6
%
(4.3
)%
(100.0)%+

0.8
 %
 
 
 
 
 
 
Reconciliation:
 
 
 
 
 
For the six months ended June 30, 2017
$
4,260

$
593

$
46

$
(21
)
$
4,878

 
 
 
 
 
 
NPM Adjustment Items - 2017
(8
)



(8
)
Asset impairment, exit, implementation and acquisition-related costs - 2017
15

42



57

Tobacco and health litigation items - 2017
16




16

 
23

42



65

 
 
 
 
 
 
NPM Adjustment Items - 2018
145




145

Asset impairment, exit and implementation costs - 2018
(3
)
(6
)


(9
)
Tobacco and health litigation items - 2018
(84
)



(84
)
 
58

(6
)


52

Operations
(102
)
86

(2
)
(62
)
(80
)
For the six months ended June 30, 2018
$
4,239

$
715

$
44

$
(83
)
$
4,915


Note: As a result of the January 1, 2018 adoption of ASU No. 2017-07, certain immaterial prior-year operating companies income (loss) amounts have been reclassified to conform with the current period’s presentation.




 
 
 
 
 
Schedule 5
ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data
(dollars in millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Quarters Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
The segment detail of excise taxes on products sold is as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Smokeable products
$
1,388

 
$
1,556

 
$
2,789

 
$
3,016

Smokeless products
34

 
34

 
66

 
64

Wine
4

 
5

 
9

 
9

 
$
1,426

 
$
1,595

 
$
2,864

 
$
3,089

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The segment detail of charges for resolution expenses related to state settlement agreements included in cost of sales is as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Smokeable products
$
961

 
$
1,184

 
$
1,978

 
$
2,264

Smokeless products
2

 
2

 
4

 
4

 
$
963

 
$
1,186

 
$
1,982

 
$
2,268

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The segment detail of FDA user fees included in cost of sales is
     as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Smokeable products
$
72

 
$
68

 
$
141

 
$
136

Smokeless products
1

 
1

 
2

 
2

 
$
73

 
$
69

 
$
143

 
$
138

 
 
 
 
 
 
 
 



 
 
 
Schedule 6
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share - Attributable to Altria Group, Inc.
For the Quarters Ended June 30,
(dollars in millions, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Net Earnings
 
 Diluted EPS
2018 Net Earnings
$
1,876

 
$
0.99

2017 Net Earnings
$
1,989

 
$
1.03

% Change
(5.7
)%
 
(3.9
)%
 
 
 


Reconciliation:
 
 
 
2017 Net Earnings
$
1,989

 
$
1.03

 
 
 


2017 Tobacco and health litigation items
11

 
0.01

2017 AB InBev special items
1

 

2017 Asset impairment, exit, implementation and acquisition-related costs
17

 
0.01

2017 Gain on AB InBev/SABMiller business combination
(265
)
 
(0.14
)
2017 Tax items
(108
)
 
(0.06
)
     Subtotal 2017 special items
(344
)
 
(0.18
)
 
 
 
 
2018 NPM Adjustment Items
58

 
0.03

2018 AB InBev special items
57

 
0.03

2018 Asset impairment, exit and implementation costs
(5
)
 

2018 Tobacco and health litigation items
(53
)
 
(0.03
)
2018 Tax items
(94
)
 
(0.05
)
     Subtotal 2018 special items
(37
)
 
(0.02
)
 
 
 
 
Fewer shares outstanding

 
0.02

Change in tax rate
311

 
0.16

Operations
(43
)
 
(0.02
)
2018 Net Earnings
$
1,876

 
$
0.99





 
 
 
 
Schedule 7
 
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and non-GAAP Measures
For the Quarters Ended June 30,
(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
2018 Reported
$
2,557

$
680

$
1,877

$
1,876

$
0.99

NPM Adjustment Items
(77
)
(19
)
(58
)
(58
)
(0.03
)
AB InBev special items
(72
)
(15
)
(57
)
(57
)
(0.03
)
Asset impairment, exit and implementation costs
6

1

5

5


Tobacco and health litigation items
70

17

53

53

0.03

Tax items

(94
)
94

94

0.05

2018 Adjusted for Special Items
$
2,484

$
570

$
1,914

$
1,913

$
1.01

 
 
 
 
 
 
2017 Reported
$
2,910

$
920

$
1,990

$
1,989

$
1.03

Tobacco and health litigation items
17

6

11

11

0.01

AB InBev special items
2

1

1

1


Asset impairment, exit, implementation and acquisition-related costs
30

13

17

17

0.01

Gain on AB InBev/SABMiller business
combination
(408
)
(143
)
(265
)
(265
)
(0.14
)
Tax items

108

(108
)
(108
)
(0.06
)
2017 Adjusted for Special Items
$
2,551

$
905

$
1,646

$
1,645

$
0.85

 


 
 
 
 
2018 Reported Net Earnings
 


$
1,876

$
0.99

2017 Reported Net Earnings
 


$
1,989

$
1.03

% Change






(5.7
)%
(3.9
)%
 
 
 
 
 
 
2018 Net Earnings Adjusted for Special Items
 
 
$
1,913

$
1.01

2017 Net Earnings Adjusted for Special Items
 
 
$
1,645

$
0.85

% Change
 
 
 
16.3
 %
18.8
 %




 
 
 
Schedule 8
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share - Attributable to Altria Group, Inc.
For the Six Months Ended June 30,
(dollars in millions, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Net Earnings
 
 Diluted EPS
2018 Net Earnings
$
3,770

 
$
1.99

2017 Net Earnings
$
3,390

 
$
1.75

% Change
11.2
%

13.7
%
 
 
 


Reconciliation:
 
 

2017 Net Earnings
$
3,390

 
$
1.75

 
 
 
 
2017 NPM Adjustment Items
(1
)
 

2017 Tobacco and health litigation items
12

 
0.01

2017 AB InBev special items
49

 
0.03

2017 Asset impairment, exit, implementation and acquisition-related costs
36

 
0.02

2017 Gain on AB InBev/SABMiller business combination
(265
)
 
(0.14
)
2017 Tax items
(166
)
 
(0.09
)
     Subtotal 2017 special items
(335
)
 
(0.17
)
 
 
 


2018 NPM Adjustment Items
109

 
0.06

2018 Tobacco and health litigation items
(73
)
 
(0.04
)
2018 AB InBev special items
149

 
0.07

2018 Asset impairment, exit and implementation costs
(7
)
 

2018 Loss on AB InBev/SABMiller business combination
(26
)
 
(0.01
)
2018 Tax items
(95
)
 
(0.05
)
     Subtotal 2018 special items
57

 
0.03

 
 
 
 
Fewer shares outstanding

 
0.04

Change in tax rate
604

 
0.31

Operations
54

 
0.03

2018 Net Earnings
$
3,770


$
1.99

 
 
 
 




 
 
 
 
Schedule 9
 
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and non-GAAP Measures
For the Six Months Ended June 30,
(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
2018 Reported
$
5,023

$
1,251

$
3,772

$
3,770

$
1.99

NPM Adjustment Items
(145
)
(36
)
(109
)
(109
)
(0.06
)
Tobacco and health litigation items
98

25

73

73

0.04

AB InBev special items
(189
)
(40
)
(149
)
(149
)
(0.07
)
Asset impairment, exit and
implementation costs
9

2

7

7


Loss on AB InBev/SABMiller
business combination
33

7

26

26

0.01

Tax items

(95
)
95

95

0.05

2018 Adjusted for Special Items
$
4,829

$
1,114

$
3,715

$
3,713

$
1.96

 
 
 
 
 
 
2017 Reported
$
5,001

$
1,609

$
3,392

$
3,390

$
1.75

NPM Adjustment Items
(1
)

(1
)
(1
)

Tobacco and health litigation items
18

6

12

12

0.01

AB InBev special items
75

26

49

49

0.03

Asset impairment, exit, implementation and
    acquisition-related costs
60

24

36

36

0.02

Gain on AB InBev/SABMiller business
combination
(408
)
(143
)
(265
)
(265
)
(0.14
)
Tax items

166

(166
)
(166
)
(0.09
)
2017 Adjusted for Special Items
$
4,745

$
1,688

$
3,057

$
3,055

$
1.58

 
 
 
 
 
 
2018 Reported Net Earnings
 
 
 
$
3,770

$
1.99

2017 Reported Net Earnings
 
 
 
$
3,390

$
1.75

% Change
 
 
 
11.2
%
13.7
%
 
 
 
 
 
 
2018 Net Earnings Adjusted for Special Items
 
 
$
3,713

$
1.96

2017 Net Earnings Adjusted for Special Items
 
 
$
3,055

$
1.58

% Change
 
 
 
21.5
%
24.1
%
 
 
 
 
 
 




 
 
 
 
Schedule 10
 
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and non-GAAP Measures
For the Year Ended December 31, 2017
(dollars in millions, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
Earnings before Income Taxes
(Benefit) Provision for Income Taxes
Net Earnings
Net Earnings Attributable to Altria
Diluted EPS
2017 Reported
$
9,828

$
(399
)
$
10,227

$
10,222

$
5.31

NPM Adjustment Items
4

2

2

2


Tobacco and health litigation items
80

30

50

50

0.03

AB InBev special items
160

55

105

105

0.05

Asset impairment, exit, implementation and
acquisition-related costs
89

34

55

55

0.03

Gain on AB InBev/SABMiller business
combination
(445
)
(156
)
(289
)
(289
)
(0.15
)
Settlement charge for lump sum pension payments
81

32

49

49

0.03

Tax items

3,674

(3,674
)
(3,674
)
(1.91
)
2017 Adjusted for Special Items
$
9,797

$
3,272

$
6,525

$
6,520

$
3.39

 
 
 
 
 
 




 
 
 
Schedule 11
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in millions)
(Unaudited)
 
 
 
 
 
June 30, 2018
 
December 31, 2017
Assets
 
 
 
Cash and cash equivalents
$
1,430

 
$
1,253

Inventories
2,123

 
2,225

Other current assets
578

 
866

Property, plant and equipment, net
1,878

 
1,914

Goodwill and other intangible assets, net
17,712

 
17,707

Investment in AB InBev
18,178

 
17,952

Finance assets, net
856