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 Altria Reports 2019 Fourth-Quarter and Full-Year Results; Provides 2020 Full-Year Earnings Guidance; Revises 2020 - 2022 Adjusted Diluted EPS Growth Objective; Revises Terms of JUUL Transaction
   Thursday, January 30, 2020 7:00:00 AM ET

RICHMOND, Va.--(BUSINESS WIRE)--Altria Group, Inc. (Altria) (NYSE: MO) today announces its 2019 fourth-quarter and full-year business results, provides guidance for 2020 full-year adjusted diluted earnings per share (EPS) and revises its adjusted diluted EPS objective for the years 2020 through 2022.

“Altria’s core tobacco businesses delivered outstanding performance in 2019. In addition, Altria exceeded its $575 million annualized cost savings target and increased the dividend for the 54th time in 50 years,” said Howard Willard, Altria’s Chairman and Chief Executive Officer.



“Despite the unexpected challenges related to our investment in JUUL, which led to impairment charges and reported losses, we made significant progress advancing and building our noncombustible business platform with the launch of IQOS and completion of the on! transaction. We enter 2020 with continued focus on harm reduction. We believe Altria’s enhanced business platform best positions us to succeed under various future category scenarios.”

As previously announced, a conference call with the investment community and news media will be webcast on January 30, 2020 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)

Q4 2019

Change vs.
Q4 2018

 

Full Year 2019

Change vs.
Full Year 2018

Net revenues

$6,007

(1.8)%

 

$25,110

(1.0)%

Revenues net of excise taxes

$4,802

0.3%

 

$19,796

0.9%

 

Reported tax rate

(48.3)%

(75.1) pp

 

269.5%

244.1 pp

Adjusted tax rate

23.5%

0.4 pp

 

23.8%

0.7 pp

 

Reported diluted EPS2

$(1.00)

(100.0)%+

 

$(0.70)

(100.0)%+

Adjusted diluted EPS

$1.02

7.4%

 

$4.22

5.8%

1 “Adjusted” financial measures presented in this release exclude the impact of special items. See “Basis of Presentation” for more information.

2 “EPS” is defined as diluted earnings (losses) per share attributable to Altria.

Cash Returns to Shareholders

Dividends:

  • Altria’s current annualized dividend rate is $3.36 per share, representing an annualized dividend yield of 6.8% as of January 27, 2020 and an increase of 5.0% from 2018.
  • Altria expects to maintain a dividend payout ratio target of approximately 80% of adjusted diluted EPS for the years 2020 through 2022. Future dividend payments remain subject to the discretion of Altria’s Board of Directors (Board).

Share Repurchase Program:

  • Altria repurchased 16.5 million shares in 2019 at an average price of $51.24 per share, for a total cost of approximately $845 million.
  • As of December 31, 2019, Altria had $500 million remaining in the current $1 billion share repurchase program, which Altria expects to complete by the end of 2020. The timing of share repurchases depends on marketplace conditions and other factors, and this program remains subject to the discretion of the Board.

Noncombustible Products Business Platform

IQOS Heated Tobacco System

  • IQOS is now commercialized in the Atlanta, Georgia and Richmond, Virginia lead markets.
  • Heatsticks are distributed across more than 500 retail stores in Atlanta and Richmond combined.
  • There are now more than 100+ trained IQOS professionals to provide guided trials to adult smokers.

on! Oral Nicotine Pouches

  • on! is now available in 15,000 stores nationally, including 3 of the top 5 chains for smokeless volume.
  • Helix expects to begin manufacturing on! at the Richmond Manufacturing Center in first-quarter 2020.

Cost Reduction Program

  • Altria achieved $600 million in annualized cost savings in 2019, exceeding the target $575 million annualized cost reduction program announced in December 2018 (Cost Reduction Program). The program included savings from workforce reductions, third-party spending reductions and the closure of Altria’s Nu Mark operations.

JUUL Investment

  • Altria recorded a fourth-quarter, non-cash pre-tax impairment charge of $4.1 billion related to its investment in JUUL. This impairment is primarily due to the increased number of legal cases pending against JUUL and the expectation that the number of legal cases against JUUL will continue to increase. Since October 31, 2019, the number of legal cases pending against JUUL has increased by more than 80%. Altria has not made any assumptions, or drawn any conclusions, regarding the merits or likelihood of success of any of these cases, litigation is subject to uncertainty and it is possible that there could be adverse developments in pending or future cases. For 2019, Altria recorded a total of $8.6 billion in non-cash pre-tax impairment charges to its JUUL investment, bringing the value of its JUUL investment to $4.2 billion as of December 31, 2019.
  • Altria now expects a resolution with respect to antitrust clearance in the first half of 2020.

Revised Terms for Investment in JUUL

Altria and JUUL agreed to revised terms governing Altria’s minority investment in JUUL, which include the following provisions:

  • Altria and JUUL are focusing their work together to create compelling pre-market tobacco product applications (PMTA) based on rigorous scientific research and data-driven underage use prevention efforts. As a result, Altria will continue providing regulatory affairs services to JUUL, which includes supporting the company in preparing and submitting its PMTA. Altria will discontinue all other services by the end of March 2020 that were part of the original investment agreement.
  • JUUL will, upon antitrust clearance from the U.S. Federal Trade Commission under the Hart-Scott-Rodino Act, restructure its board of directors to consist of two directors designated by Altria, three independent directors, the JUUL CEO and three directors designated by JUUL stockholders other than Altria.
  • Upon antitrust clearance, the restructured JUUL Board of Directors will add a nominating committee and a litigation oversight committee to its existing compensation and audit committees.
  • Altria has the option to be released from its non-compete obligation if JUUL is prohibited by federal law from selling e-vapor products in the U.S. for at least a year, or if Altria’s carrying value of the JUUL investment is not more than 10% of its initial carrying value of $12.8 billion.

“This agreement is a continuation of the reset initiated by JUUL’s leadership team.” said Willard. “We look forward to working with the company under this structure to support JUUL’s commitment to working with regulators and submitting the best possible PMTA.”

For more information, see the Form 8-K that will be filed with the Securities and Exchange Commission (SEC).

Expected Accounting Methodology for Investment in JUUL

Upon antitrust clearance, Altria expects to account for its equity investment in JUUL using the fair value option. Under the fair value option, Altria’s income statement will include any cash dividends received from the investment and any quarterly changes in the fair value of the investment. Quarterly changes in the fair value of the investment will be treated as a special item and excluded from adjusted diluted EPS.

2020 - 2022 Adjusted Diluted EPS Growth Objective

Altria lowers its compounded annual adjusted diluted EPS growth objective to 4% to 7% for the years 2020 through 2022 from its previously announced objective of 5% to 8%, primarily to reflect Altria’s current expectation for no equity earnings contributions from JUUL through 2022.

2020 Full-Year Guidance

Altria expects its 2020 full-year adjusted diluted EPS to be in a range of $4.39 to $4.51, representing a growth rate of 4% to 7% from an adjusted diluted EPS base of $4.22 in 2019, as shown in Table 1. Altria’s 2020 guidance reflects increased investments related to PM USA’s commercialization efforts for IQOS, Helix’s plans to manufacture and expand U.S. distribution of on! and one extra shipping day in the first quarter.

The guidance range excludes estimated per share charges in 2020 of $0.05 of tax expense resulting from the Tax Cuts and Jobs Act (Tax Reform Act) related to a tax basis adjustment to Altria’s ABI investment.

Altria expects the 2020 full-year total domestic cigarette industry adjusted volume decline rate to be in a range of 4% to 6%, which includes the impact of federal legislation raising the minimum age to purchase all tobacco products to 21. Altria expects continued volatility across tobacco categories and will no longer provide a multi-year forecast for U.S. cigarette volume declines.

Altria expects its 2020 full-year adjusted effective tax rate will be in a range of 23.5% to 24.5%.

Altria expects its 2020 capital expenditures to be between $225 million and $275 million and depreciation and amortization expenses of approximately $240 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, restructuring charges, asset impairment charges, acquisition-related costs, equity investment-related special items (including any changes in fair value for the equity investment and any related warrants and preemptive rights), certain tax items, charges associated with tobacco and health litigation items, and resolutions of certain nonparticipating 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 or its reported effective tax rate because these items, which could be significant, may be unusual or infrequent, are difficult to predict and may be highly variable. As a result, Altria does not provide a corresponding U.S. generally accepted accounting principles (GAAP) measure for, or reconciliation to, its adjusted diluted EPS guidance or its adjusted effective tax rate forecast.

The factors described in the “Forward-Looking and Cautionary Statements” section of this release represent continuing risks to Altria’s forecast.

ALTRIA GROUP, INC.

See Basis of Presentation below for an explanation of financial measures and reporting segments discussed in this release.

Financial Performance

Fourth Quarter

  • Net revenues decreased 1.8% to $6.0 billion, primarily due to lower net revenues in the smokeable products segment, partially offset by higher net revenues in the smokeless products segment. Revenues net of excise taxes was essentially unchanged at $4.8 billion.
  • Reported diluted EPS decreased 100%+ to ($1.00), primarily driven by the impairment of JUUL equity securities and higher interest expense, partially offset by higher reported operating companies income (OCI), higher reported earnings from Altria’s equity investment in ABI, 2019 Cronos-related special items and favorable tax items.
  • Adjusted diluted EPS increased 7.4% to $1.02, primarily driven by higher adjusted OCI in the smokeable and smokeless products segments and higher adjusted earnings from Altria’s equity investment in ABI, partially offset by higher interest expense.

Full Year

  • Net revenues decreased 1.0% to $25.1 billion, primarily due to lower net revenues in the smokeable products segment, partially offset by higher net revenues in the smokeless products segment. Revenues net of excise taxes increased 0.9% to $19.8 billion.
  • Reported diluted EPS decreased 100+% to ($0.70), primarily driven by the impairment of JUUL equity securities, 2019 Cronos-related special items and higher interest expense (which includes acquisition-related costs associated with the JUUL and Cronos transactions), partially offset by higher reported OCI, favorable tax items and higher reported earnings from Altria’s equity investment in ABI.
  • Adjusted diluted EPS increased 5.8% to $4.22, primarily driven by higher adjusted OCI in the smokeable and smokeless products segments, lower spending as a result of Altria’s decision in 2018 to refocus its innovative products efforts and higher adjusted earnings from Altria’s equity investment in ABI, partially offset by higher interest expense.

Table 1 - Altria’s Adjusted Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

Full Year

 

2019

2018

Change

 

2019

2018

Change

Reported diluted EPS

$

 

(1.00

)

$

 

0.66

 

(100.0)%+

 

$

 

(0.70

)

$

 

3.68

 

(100.0)%+

NPM Adjustment Items

 

 

 

 

 

 

(0.06

)

 

Asset impairment, exit, implementation
and acquisition-related costs

 

0.06

 

 

0.23

 

 

 

 

0.15

 

 

0.23

 

 

Tobacco and health litigation items

 

0.01

 

 

 

 

 

0.03

 

 

0.05

 

 

ABI-related special items

 

(0.16

)

 

0.03

 

 

 

 

(0.15

)

 

(0.03

)

 

Cronos-related special items

 

(0.06

)

 

 

 

 

0.34

 

 

 

Impairment of JUUL equity securities

 

2.20

 

 

 

 

 

4.60

 

 

 

(Gain) loss on ABI/SABMiller
business combination

 

 

 

 

 

 

0.01

 

 

Tax items

 

(0.03

)

 

0.03

 

 

 

 

(0.05

)

 

0.11

 

 

Adjusted diluted EPS

$

 

1.02

 

$

 

0.95

 

7.4

%

 

$

 

4.22

 

$

 

3.99

 

5.8

%

 

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

Special Items

The EPS impact of the following special items is shown in Table 1 and Schedules 7 and 9.

NPM Adjustment Items

  • For the full year 2018, Altria recorded pre-tax income of $145 million (or $0.06 per share) for NPM adjustment settlements with 10 states.

Asset Impairment, Exit, Implementation and Acquisition-Related Costs

  • In the fourth quarter of 2019, Altria recorded pre-tax charges of $116 million (or $0.06 per share), primarily due to the impairment of the Ste. Michelle goodwill and the Cost Reduction Program.
  • For the full year 2019, Altria recorded pre-tax charges of $331 million (or $0.15 per share), primarily due to the Cost Reduction Program, acquisition-related costs associated with the JUUL and Cronos transactions, and the impairment of the Ste. Michelle goodwill.
  • In the fourth quarter of 2018, Altria recorded pre-tax charges of $532 million (or $0.23 per share) related to Altria’s decision to refocus its innovative product efforts (which includes the discontinuation of production and distribution of all MarkTen and Green Smoke e-vapor products), the Cost Reduction Program, acquisition-related costs related to the JUUL transaction and the impairment of the Columbia Crest trademark.

Tobacco and Health Litigation Items

  • For the full year 2019, Altria recorded pre-tax charges of $77 million (or $0.03 per share) for tobacco and health litigation items, including related interest costs.
  • For the full year 2018, Altria recorded pre-tax charges of $131 million (or $0.05 per share) for tobacco and health litigation items, including related interest costs.

ABI-Related Special Items

  • In the fourth quarter and full year 2019, equity earnings from ABI included net pre-tax income of $364 million (or $0.16 per share) and $354 million (or $0.15 per share), respectively, consisting primarily of a gain related to ABI’s completion of its initial public offering of a minority stake of its Asia Pacific subsidiary and Altria’s share of ABI’s mark-to-market gains on ABI’s derivative financial instruments used to hedge certain share commitments.
  • In the fourth quarter of 2018, equity earnings from ABI included net pre-tax charges of $69 million (or $0.03 per share), consisting primarily of Altria’s share of ABI’s mark-to-market losses on ABI’s derivative financial instruments used to hedge certain share commitments.
  • For the full year 2018, equity earnings from ABI included net pre-tax income of $85 million (or $0.03 per share), consisting primarily of Altria’s share of ABI’s estimated effect of the Tax Reform Act and gains related to ABI’s merger and acquisition activities, partially offset by Altria’s share of ABI’s mark-to-market losses on ABI’s derivative financial instruments used to hedge certain share commitments.

Cronos-Related Special Items

  • In the fourth quarter of 2019, Altria recorded net pre-tax income of $165 million (or $0.06 per share), consisting of the following: net gains of $280 million (included in earnings from equity investments), substantially all of which related to Altria’s share of Cronos’s non-cash change in the fair value of Cronos’s derivative financial instruments associated with the issuance of additional shares, partially offset by Altria’s mark-to-market losses of $115 million due to the non-cash change during the quarter in the fair value of Cronos-related derivative financial instruments to acquire additional shares of Cronos.
  • For the full year of 2019, Altria recorded net pre-tax charges of $0.9 billion (or $0.34 per share), consisting of the following: Altria’s mark-to-market losses of $1.4 billion, primarily due to the non-cash change during the year in the fair value of Cronos-related derivative financial instruments to acquire additional shares of Cronos, partially offset by income of $0.5 billion (included in earnings from Altria’s equity investment in Cronos), substantially all of which related to Altria’s share of Cronos’s non-cash change in the fair value of Cronos’s derivative financial instruments associated with the issuance of additional shares.

Impairment of JUUL Equity Securities

  • In the fourth quarter and full year of 2019, Altria recorded non-cash pre-tax impairment charges of $4.1 billion (or $2.20 per share) and $8.6 billion (or $4.60 per share), respectively, reflecting the impairment of Altria’s equity securities in JUUL. A full tax valuation allowance was recorded for this charge that offset the tax benefit associated with the impairment charge.

Tax Items

  • In the fourth quarter of 2019, Altria recorded income tax benefits of $43 million (or $0.03 per share), primarily related to tax benefits of $94 million for adjustments as a result of amended returns, partially offset by tax expense of $27 million for a valuation allowance on foreign tax credits not realizable and $21 million related to a tax basis adjustment to Altria’s equity investment in ABI.
  • For the full year 2019, Altria recorded income tax benefits of $99 million (or $0.05 per share), primarily related to $105 million for adjustments as a result of amended returns and tax benefits of $100 million for the reversal of tax accruals no longer required, partially offset by tax expense of $84 million related to a tax basis adjustment to Altria’s equity investment in ABI and $38 million for a valuation allowance on foreign tax credits not realizable.
  • In the fourth quarter of 2018, Altria recorded income tax charges of $45 million (or $0.03 per share) primarily related to a tax basis adjustment to Altria’s equity investment in ABI and an adjustment to the provisional estimates for the repatriation tax.
  • For the full year 2018, Altria recorded income tax charges of $197 million (or $0.11 per share) primarily related to a tax basis adjustment to Altria’s equity investment in ABI, a valuation allowance on foreign tax credit carryforwards that are not realizable and an adjustment to the provisional estimates for the repatriation tax.

SMOKEABLE PRODUCTS

Revenues and OCI

Fourth Quarter

  • Net revenues decreased 2.7%, primarily driven by lower shipment volume, partially offset by higher pricing and lower promotional investments. Revenues net of excise taxes decreased 0.5%.
  • Reported OCI increased 13.4%, primarily driven by higher pricing, lower costs (which includes lower asset impairment and exit costs) and lower promotional investments, partially offset by lower shipment volume, higher resolution expenses and higher tobacco and health litigation items.
  • Adjusted OCI increased 10.1%, primarily driven by higher pricing, lower costs and lower promotional investments, partially offset by lower shipment volume and higher resolution expenses. Adjusted OCI margins increased 5.3 percentage points to 54.8%.

Full Year

  • Net revenues decreased 1.3%, primarily driven by lower shipment volume, partially offset by higher pricing and lower promotional investments. Revenues net of excise taxes increased 0.7%.
  • Reported OCI increased 7.1%, primarily driven by higher pricing, lower costs (which includes lower tobacco and health litigation items) and lower promotional investments, partially offset by lower shipment volume and higher resolution expenses (which includes 2018 NPM adjustment items).
  • Adjusted OCI increased 8.6%, primarily driven by higher pricing, lower costs and lower promotional investments, partially offset by lower shipment volume and higher resolution expenses. Adjusted OCI margins increased 3.9 percentage points to 54.5%.

Table 2 - Smokeable Products: Revenues and OCI ($ in millions)

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

Full Year

 

2019

2018

Change

 

2019

2018

Change

Net revenues

$

5,159

 

$

5,302

 

(2.7

)%

 

$

21,996

 

$

22,297

 

(1.3

)%

Excise taxes

(1,168

)

(1,291

)

 

 

(5,166

)

(5,585

)

 

Revenues net of excise taxes

$

3,991

 

$

4,011

 

(0.5

)%

 

$

16,830

 

$

16,712

 

0.7

%

 

 

 

 

 

 

 

 

Reported OCI

$

2,145

 

$

1,892

 

13.4

%

 

$

9,009

 

$

8,408

 

7.1

%

NPM Adjustment Items

 

 

 

 

 

(145

)

 

Asset impairment, exit and
implementation costs

13

 

86

 

 

 

92

 

83

 

 

Tobacco and health litigation items

29

 

9

 

 

 

72

 

103

 

 

Adjusted OCI

$

2,187

 

$

1,987

 

10.1

%

 

$

9,173

 

$

8,449

 

8.6

%

Adjusted OCI margins 1

54.8

%

49.5

%

5.3 pp

 

54.5

%

50.6

%

3.9 pp

 

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

Shipment Volume

Fourth Quarter

  • Smokeable products segment reported domestic cigarette shipment volume decreased 8.7%, primarily driven by the industry’s rate of decline, retail share losses, trade inventory movements and other factors.
  • When adjusted for trade inventory movements and other factors, smokeable products segment domestic cigarette shipment volume decreased by an estimated 6%.
  • When adjusted for trade inventory movements, total domestic cigarette industry volumes declined by an estimated 4.5%.
  • Reported cigar shipment volume increased 4.6%.

Full Year

  • Smokeable products segment reported domestic cigarette shipment volume decreased 7.3%, primarily driven by the industry’s rate of decline, retail share losses, trade inventory movements and other factors.
  • When adjusted for trade inventory movements and other factors, smokeable products segment domestic cigarette shipment volume decreased by an estimated 7%.
  • When adjusted for trade inventory movements and other factors, total domestic cigarette industry volumes declined by an estimated 5.5%.
  • Reported cigar shipment volume increased 3.1%.

Table 3 - Smokeable Products: Shipment Volume (sticks in millions)

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

Full Year

 

2019

2018

Change

 

2019

2018

Change

Cigarettes:

 

 

 

 

 

 

 

Marlboro

20,126

 

21,977

 

(8.4

)%

 

88,473

 

94,770

 

(6.6

)%

Other premium

1,097

 

1,266

 

(13.3

)%

 

4,869

 

5,552

 

(12.3

)%

Discount

1,893

 

2,062

 

(8.2

)%

 

8,457

 

9,469

 

(10.7

)%

Total cigarettes

23,116

 

25,305

 

(8.7

)%

 

101,799

 

109,791

 

(7.3

)%

 

 

 

 

 

 

 

 

Cigars:

 

 

 

 

 

 

 

Black & Mild

410

 

393

 

4.3

%

 

1,641

 

1,590

 

3.2

%

Other

3

 

2

 

50.0

%

 

10

 

11

 

(9.1

)%

Total cigars

413

 

395

 

4.6

%

 

1,651

 

1,601

 

3.1

%

 

 

 

 

 

 

 

 

Total smokeable products

23,529

 

25,700

 

(8.4

)%

 

103,450

 

111,392

 

(7.1

)%

 

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

Retail Share and Brand Activity

Fourth Quarter

  • Marlboro retail share declined 0.1 share point to 43.0%.
  • PM USA’s Marlboro Rewards has reached 2.6 million enrollees since its launch in January 2019.

Full Year

  • Marlboro retail share declined 0.1 share point to 43.1%.

Table 4 - Smokeable Products: Cigarettes Retail Share (percent)

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

Full Year

 

2019

2018

Percentage
point change

 

2019

2018

Percentage
point change

Cigarettes:

 

 

 

 

 

 

 

Marlboro

43.0

%

43.1

%

(0.1)

 

43.1

%

43.2

%

(0.1)

Other premium

2.4

 

2.6

 

(0.2)

 

2.4

 

2.6

 

(0.2)

Discount

4.1

 

4.2

 

(0.1)

 

4.2

 

4.4

 

(0.2)

Total cigarettes

49.5

%

49.9

%

(0.4)

 

49.7

%

50.2

%

(0.5)

 

Note: Retail share results for cigarettes are based on data from IRI/MSAi, a tracking service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes. For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers (STARS). This service is not designed to capture sales through other channels, including the internet, direct mail and some illicitly tax-advantaged outlets. It is IRI’s standard practice to periodically refresh its services, which could restate retail share results that were previously released in this service.

SMOKELESS PRODUCTS

Revenues and OCI

Fourth Quarter

  • Net revenues increased 5.8%, primarily driven by higher pricing and lower promotional investments, partially offset by lower shipment volume. Revenues net of excise taxes increased 6.1%.
  • Reported and adjusted OCI increased 11.3% and 9.7%, respectively, primarily driven by higher pricing, lower promotional investments and lower costs, partially offset by lower shipment volume. Adjusted OCI margins increased 2.3 percentage points to 68.8%.

Full Year

  • Net revenues increased 4.6%, primarily driven by higher pricing and lower promotional investments, partially offset by lower shipment volume. Revenues net of excise taxes increased 5.1%.
  • Reported and adjusted OCI increased 10.4% and 9.7%, respectively, primarily driven by higher pricing, lower promotional investments and lower costs, partially offset by lower shipment volume. Adjusted OCI margins increased 3.0 percentage points to 71.7%.

Table 5 - Smokeless Products: Revenues and OCI ($ in millions)

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

Full Year

 

2019

2018

Change

 

2019

2018

Change

Net revenues

$

605

 

$

572

 

5.8

%

 

$

2,367

 

$

2,262

 

4.6

%

Excise taxes

(31

)

(31

)

 

 

(127

)

(131

)

 

Revenues net of excise taxes

$

574

 

$

541

 

6.1

%

 

$

2,240

 

$

2,131

 

5.1

%

 

 

 

 

 

 

 

 

Reported OCI

$

385

 

$

346

 

11.3

%

 

$

1,580

 

$

1,431

 

10.4

%

Asset impairment, exit, implementation
and acquisition-related costs

10

 

14

 

 

 

26

 

23

 

 

Tobacco and health litigation items

 

 

 

 

 

10

 

 

Adjusted OCI

$

395

 

$

360

 

9.7

%

 

$

1,606

 

$

1,464

 

9.7

%

Adjusted OCI margins 1

68.8

%

66.5

%

2.3 pp

 

71.7

%

68.7

%

3.0 pp

 

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

Shipment Volume

Fourth Quarter

  • Smokeless products segment reported domestic shipment volume declined 4.0%, primarily driven by calendar differences, the industry’s rate of decline, retail share losses and other factors, partially offset by trade inventory movements. When adjusted for trade inventory movements and calendar differences, smokeless products segment shipment volume declined an estimated 2.5%.

Full Year

  • Smokeless products segment reported domestic shipment volume declined 3.1%, primarily driven by the industry’s rate of decline, calendar differences, retail share losses and other factors, partially offset by trade inventory movements. When adjusted for trade inventory movements and calendar differences, smokeless products segment shipment volume declined an estimated 3%.
  • Total smokeless industry volume declined by an estimated 1% over the past six months.

Table 6 - Smokeless Products: Shipment Volume
(cans and packs in millions)

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

Full Year

 

2019

2018

Change

 

2019

2018

Change

Copenhagen

129.1

 

133.5

 

(3.3

)%

 

522.2

 

531.7

 

(1.8

)%

Skoal

53.6

 

56.6

 

(5.3

)%

 

217.8

 

231.1

 

(5.8

)%

Copenhagen and Skoal

182.7

 

190.1

 

(3.9

)%

 

740.0

 

762.8

 

(3.0

)%

Other

16.8

 

17.7

 

(5.1

)%

 

67.0

 

69.8

 

(4.0

)%

Total smokeless products

199.5

 

207.8

 

(4.0

)%

 

807.0

 

832.6

 

(3.1

)%

 

Note: Volume includes cans and packs sold, as well as promotional units, but excludes international volume and oral nicotine pouch volume, which are currently 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

Fourth Quarter

  • Copenhagen maintained retail share at 34.8%.
  • Skoal retail share declined 0.2 share points to 15.5%.

Full Year

  • Copenhagen retail share grew 0.3 share points to 34.8%.
  • Skoal retail share declined 0.6 share points to 15.6%.

Table 7 - Smokeless Products: Retail Share (percent)

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

Full Year

 

2019

2018

Percentage
point change

 

2019

2018

Percentage
point change

Copenhagen

34.8

%

34.8

%

 

34.8

%

34.5

%

0.3

Skoal

15.5

 

15.7

 

(0.2)

 

15.6

 

16.2

 

(0.6)

Copenhagen and Skoal

50.3

 

50.5

 

(0.2)

 

50.4

 

50.7

 

(0.3)

Other

3.6

 

3.5

 

0.1

 

3.5

 

3.3

 

0.2

Total smokeless products

53.9

%

54.0

%

(0.1)

 

53.9

%

54.0

%

(0.1)

 

Note: The smokeless products retail share results exclude international volume and oral nicotine pouch volume. 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

Revenues, OCI and Shipment Volume

Fourth Quarter

  • Net revenues increased 2.0%, driven by higher shipment volume.
  • Reported OCI decreased $30 million, primarily driven by the 2019 impairment of the wine segment goodwill and higher costs, partially offset by the 2018 impairment of the Columbia Crest trademark.
  • Adjusted OCI decreased $8 million, primarily driven by higher costs.
  • Reported wine shipment volume increased 2.6% to approximately 2.4 million cases.

Full Year

  • Net revenues decreased 0.3%, primarily driven by higher promotional investments, partially offset by higher shipment volume and favorable premium mix.
  • Reported OCI decreased $53 million, primarily driven by the 2019 impairment of the wine segment goodwill, higher costs and higher promotional investments, partially offset by the 2018 impairment of the Columbia Crest trademark.
  • Adjusted OCI decreased $31 million, primarily driven by higher costs and higher promotional investments.
  • Reported wine shipment volume increased 0.6% to approximately 8.3 million cases.

Table 8 - Wine: Revenues and OCI (Loss) ($ in millions)

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

Full Year

 

2019

2018

Change

 

2019

2018

Change

Net revenues

$

206

 

$

202

 

2.0

%

 

689

 

$

691

 

(0.3

)%

Excise taxes

(6

)

(6

)

 

 

(21

)

(21

)

 

Revenues net of excise taxes

$

200

 

$

196

 

2.0

%

 

$

668

 

$

670

 

(0.3

)%

 

 

 

 

 

 

 

 

Reported Operating Companies
Income (Loss)

$

(53

)

$

(23

)

(100.0)%+

 

$

(3

)

$

50

 

(100.0)%+

Asset impairment and exit costs

76

 

54

 

 

 

76

 

54

 

 

Adjusted OCI

$

23

 

$

31

 

(25.8

)%

 

$

73

 

$

104

 

(29.8

)%

Adjusted OCI margins 1

11.5

%

15.8

%

(4.3) pp

 

10.9

%

15.5

%

(4.6) 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. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC), John Middleton Co. (Middleton), Sherman Group Holdings, LLC and its subsidiaries (Nat Sherman), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital Corporation (PMCC). Altria owns an 80% interest in Helix Innovations LLC (Helix). Altria holds equity investments in Anheuser-Busch InBev SA/NV (ABI), JUUL Labs, Inc. (JUUL) and Cronos Group Inc. (Cronos).

The brand portfolios of Altria’s tobacco operating companies include Marlboro®, Black & Mild®, Copenhagen®, Skoal® and on!®. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle®, 14 Hands® and Stag’s Leap Wine Cellars, and it imports and markets Antinori®, Champagne Nicolas Feuillatteand 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, or follow Altria on Twitter, Facebook and LinkedIn.

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 certain financial results, including OCI, OCI margins and diluted EPS, on an adjusted basis, which excludes certain income and expense items, including those items noted under “2020 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 unusual or 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 ABI and Cronos and reports its share of ABI’s and Cronos’s results using a one-quarter lag because ABI’s and Cronos’s results are not available in time to record them in the concurrent period. The one-quarter reporting lag for ABI and Cronos does not affect Altria’s cash flows. Altria accounts for its investment in JUUL as an investment in an equity security. If and when antitrust clearance is obtained, Altria expects to account for its investment in JUUL under the fair value option.

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 oral nicotine pouches sold by Helix; and wine, produced and/or distributed by Ste. Michelle. Results for innovative tobacco products 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 release are described in Altria’s publicly filed reports, including its Annual Report on Form 10-K for the year ended December 31, 2018 and its Quarterly Reports on Form 10-Q for the periods ended March 31, 2019 and September 30, 2019. These factors include the following:

  • unfavorable litigation outcomes, including risks associated with adverse jury and judicial determinations, courts and arbitrators reaching conclusions at variance with our, our subsidiaries’ and our investees’ understanding of applicable law, bonding requirements in the jurisdictions that do not limit the dollar amount of appeal bonds, and certain challenges to bond cap statutes;
  • government, including U.S. Food and Drug Administration (FDA), and private sector actions that impact adult tobacco consumer acceptability of, or access to, tobacco products;
  • the growth of the e-vapor category and other innovative tobacco products contributing to reductions in cigarette and smokeless tobacco product consumption levels and sales volume;
  • tobacco product taxation, including lower tobacco product consumption levels and potential shifts in adult consumer purchases as a result of federal and state excise tax increases;
  • the failure by our tobacco and wine subsidiaries to compete effectively in their respective markets;
  • our tobacco and wine subsidiaries’ 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 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;
  • changes, including in economic conditions that result in consumers choosing lower-priced brands;
  • the unsuccessful commercialization of adjacent products or processes by our tobacco subsidiaries and investees, including innovative tobacco products that may reduce the health risks associated with current tobacco products and that appeal to adult tobacco consumers;
  • significant changes in price, availability or quality of tobacco, other raw materials or component parts;
  • the risks related to the reliance by our tobacco subsidiaries on a few significant facilities and a small number of key suppliers, including an extended disruption at a facility or of service by a supplier;
  • required or voluntary product recalls as a result of various circumstances such as product contamination or FDA or other regulatory action;
  • the failure of our information systems or service providers’ information systems to function as intended, or cyber-attacks or security breaches;
  • unfavorable outcomes of any government investigations of Altria, our subsidiaries or our investees;
  • a successful challenge to our tax positions;
  • the risks related to our and our investees’ international business operations, including failure to prevent violations of various United States and foreign laws and regulations such as laws prohibiting bribery and corruption;
  • our inability to attract and retain the best talent due to the impact of decreasing social acceptance of tobacco usage and tobacco control actions;
  • the adverse effect of acquisitions or other events on our credit rating;
  • our inability to acquire attractive businesses or make attractive investments on favorable terms, or at all, or to realize the anticipated benefits from an acquisition or investment;
  • the risks related to disruption and uncertainty in the credit and capital markets, including risk of access to these markets both generally and at current prevailing rates which may adversely affect our earnings or dividend rate or both;
  • impairment losses as a result of the write down of intangible assets, including goodwill;
  • the risks related to Ste. Michelle’s wine business, including competition, unfavorable changes in grape supply and governmental regulations;
  • the adverse effects of risks encountered by ABI in its business, foreign currency exchange rates and ABI’s stock price on our equity investment in ABI, including on our reported earnings from and carrying value of our investment in ABI and the dividends paid by ABI on the shares we own;
  • the risks related to our inability to transfer our equity securities in ABI until October 10, 2021, and, if our ownership percentage decreases below certain levels, the adverse effects of additional tax liabilities, a reduction in the number of directors that we have the right to have appointed to the ABI Board of Directors, and our potential inability to use the equity method of accounting for our investment in ABI;
  • the risk of challenges to the tax treatment of the consideration we received in the ABI/SABMiller business combination and the tax treatment of our equity investment;
  • the risks related to our inability to obtain antitrust clearance required for the conversion of our non-voting JUUL shares into voting shares in a timely manner or at all, including the resulting limitations on our rights with respect to our investment in JUUL;
  • the risks generally related to our investments in JUUL and Cronos, including our inability to realize the expected benefits of our investments in the expected time frames, or at all, due to the risks encountered by our investees in their businesses, such as operational, compliance and regulatory risks at the international, federal, state and local levels, including actions by the FDA, and adverse publicity; potential disruptions to our investees’ management or current or future plans and operations; domestic or international litigation developments, government investigations, tax disputes or otherwise; and impairment of our investments;
  • the risks related to our inability to acquire a controlling interest in JUUL as a result of standstill restrictions or to control the material decisions of JUUL, restrictions on our ability to sell or otherwise transfer our shares of JUUL until December 20, 2024, and non-competition restrictions for the same time period;
  • the risks related to any decrease of our percentage ownership in JUUL, including the loss of certain of our governance, consent, preemptive and other rights; and
  • the risks, including criminal, civil or tax liability for Altria, related to Cronos’s failure to comply with applicable laws, including cannabis laws.

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 Subsidiaries
Consolidated Statements of Earnings (Losses)
For the Quarters Ended December 31,
(dollars in millions, except per share data)
(Unaudited)

 

2019

 

2018

 

% Change

 

 

 

 

 

 

Net revenues

$

 

6,007

 

 

$

 

6,114

 

 

(1.8)%

Cost of sales 1

 

1,718

 

 

 

1,864

 

 

 

Excise taxes on products 1

 

1,205

 

 

 

1,328

 

 

 

Gross profit

 

3,084

 

 

 

2,922

 

 

5.5%

Marketing, administration and research costs

 

511

 

 

 

626

 

 

 

Asset impairment and exit costs

 

85

 

 

 

381

 

 

 

Operating companies income

 

2,488

 

 

 

1,915

 

 

29.9%

Amortization of intangibles

 

16

 

 

 

8

 

 

 

General corporate expenses

 

45

 

 

 

163

 

 

 

Operating income

 

2,427

 

 

 

1,744

 

 

39.2%

Interest and other debt expense, net

 

291

 

 

 

162

 

 

 

Net periodic benefit (income) cost, excluding service cost

 

3

 

 

 

3

 

 

 

Earnings from equity investments 1

 

(859

)

 

 

(131

)

 

 

Impairment of JUUL equity securities

 

4,100

 

 

 

 

 

Loss on Cronos-related financial instruments

 

115

 

 

 

 

 

Earnings (losses) before income taxes

 

(1,223

)

 

 

1,710

 

 

(100.0)%+

Provision (benefit) for income taxes

 

591

 

 

 

459

 

 

 

Net earnings (losses)

 

(1,814

)

 

 

1,251

 

 

(100.0)%+

Net (earnings) losses attributable to noncontrolling interests

 

5

 

 

 

(1

)

 

 

Net earnings (losses) attributable to Altria

$

 

(1,809

)

 

$

 

1,250

 

 

(100.0)%+

 

 

 

 

 

 

Per share data:

 

 

 

 

 

Diluted earnings (losses) per share attributable to Altria

$

 

(1.00

)

 

$

 

0.66

 

 

(100.0)%+

 

 

 

 

 

 

Weighted-average diluted shares outstanding

 

1,865

 

 

 

1,877

 

 

(0.6)%

1

Cost of sales includes charges for resolution expenses related to state settlement agreements and FDA user fees. Supplemental information concerning those items, excise taxes on products sold and earnings from equity investments 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

 

Smokeable
Products

Smokeless
Products

Wine

All Other

Total

2019

$

5,159

 

$

605

 

$

206

 

$

37

 

$

6,007

 

2018

5,302

 

572

 

202

 

38

 

6,114

 

% Change

(2.7

)%

5.8

%

2.0

%

(2.6

)%

(1.8

)%

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended December 31, 2018

$

5,302

 

$

572

 

$

202

 

$

38

 

$

6,114

 

Operations

(143

)

33

 

4

 

(1

)

(107

)

For the quarter ended December 31, 2019

$

5,159

 

$

605

 

$

206

 

$

37

 

$

6,007

 

 

 

 

 

 

 

 

Operating Companies Income (Loss)

 

Smokeable
Products

Smokeless
Products

Wine

All Other

Total

2019

$

2,145

 

$

385

 

$

(53

)

$

11

 

$

2,488

 

2018

1,892

 

346

 

(23

)

(300

)

1,915

 

% Change

13.4

%

11.3

%

(100.0)%+

100.0%+

29.9

%

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended December 31, 2018

$

1,892

 

$

346

 

$

(23

)

$

(300

)

$

1,915

 

 

 

 

 

 

 

Asset impairment, exit and implementation
costs - 2018

86

 

14

 

54

 

290

 

444

 

Tobacco and health litigation items - 2018

9

 

 

 

 

9

 

 

95

 

14

 

54

 

290

 

453

 

 

 

 

 

 

 

Asset impairment, exit, implementation and
acquisition-related costs - 2019

(13

)

(10

)

(76

)

3

 

(96

)

Tobacco and health litigation items - 2019

(29

)

 

 

 

(29

)

 

(42

)

(10

)

(76

)

3

 

(125

)

Operations

200

 

35

 

(8

)

18

 

245

 

For the quarter ended December 31, 2019

$

2,145

 

$

385

 

$

(53

)

$

11

 

$

2,488

 

 

 

 

 

 

 

Schedule 3

ALTRIA GROUP, INC.
and Subsidiaries
Consolidated Statements of Earnings (Losses)
For the Years Ended December 31,
(dollars in millions, except per share data)
(Unaudited)

 

 

2019

 

2018

 

% Change

 

 

 

 

 

 

Net revenues

$

25,110

 

 

$

25,364

 

 

(1.0)%

Cost of sales 1

7,085

 

 

7,373

 

 

 

Excise taxes on products 1

5,314

 

 

5,737

 

 

 

Gross profit

12,711

 

 

12,254

 

 

3.7%

Marketing, administration and research costs

1,983

 

 

2,403

 

 

 

Asset impairment and exit costs

158

 

 

383

 

 

 

Operating companies income

10,570

 

 

9,468

 

 

11.6%

Amortization of intangibles

44

 

 

38

 

 

 

General corporate expenses

199

 

 

315

 

 

 

Corporate asset impairment and exit costs

1

 

 

 

 

 

Operating income

10,326

 

 

9,115

 

 

13.3%

Interest and other debt expense, net

1,280

 

 

665

 

 

 

Net periodic benefit (income) cost, excluding service cost

(37

)

 

(34

)

 

 

Earnings from equity investments 1

(1,725

)

 

(890

)

 

 

Impairment of JUUL equity securities 

8,600

 

 

 

 

 

Loss on Cronos-related financial instruments

 

1,442

 

 

 

 

 

(Gain) loss on ABI/SABMiller business combination

 

 

33

 

 

 

Earnings (losses) before income taxes

766

 

 

9,341

 

 

(91.8)%

Provision (benefit) for income taxes

2,064

 

 

2,374

 

 

 

Net earnings (losses)

(1,298

)

 

6,967

 

 

(100.0)%+

Net (earnings) losses attributable to noncontrolling interests

5

 

 

(4

)

 

 

Net earnings (losses) attributable to Altria

$

(1,293

)

 

$

6,963

 

 

(100.0)%+

 

 

 

 

 

 

Per share data2:

 

 

 

 

 

Diluted earnings (losses) per share attributable to Altria

$

(0.70

)

 

$

3.68

 

 

(100.0)%+

 

 

 

 

 

 

Weighted-average diluted shares outstanding

1,869

 

 

1,888

 

 

(1.0)%

1

Cost of sales includes charges for resolution expenses related to state settlement agreements and FDA user fees. Supplemental information concerning those items, excise taxes on products sold and earnings from equity investments is shown in Schedule 5.

 

2

Diluted earnings (losses) per share attributable to Altria are computed independently for each period. Accordingly, the sum of the quarterly earnings (losses) 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

 

Smokeable
Products

Smokeless
Products

Wine

All Other

Total

2019

$

 

21,996

 

$

 

2,367

 

$

 

689

 

$

 

58

 

$

 

25,110

 

2018

 

22,297

 

 

2,262

 

 

691

 

 

114

 

 

25,364

 

% Change

 

(1.3

)%

 

4.6

%

 

(0.3

)%

 

(49.1

)%

 

(1.0

)%

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2018

$

 

22,297

 

$

 

2,262

 

$

 

691

 

$

 

114

 

$

 

25,364

 

Operations

 

(301

)

 

105

 

 

(2

)

 

(56

)

 

(254

)

For the year ended December 31, 2019

$

 

21,996

 

$

 

2,367

 

$

 

689

 

$

 

58

 

$

 

25,110

 

 

 

 

 

 

 

 

Operating Companies Income (Loss)

 

Smokeable
Products

Smokeless
Products

Wine

All Other

Total

2019

$

 

9,009

 

$

 

1,580

 

$

 

(3

)

$

 

(16

)

$

 

10,570

 

2018

 

8,408

 

 

1,431

 

 

50

 

 

(421

)

 

9,468

 

% Change

 

7.1

%

 

10.4

%

(100.0)%+

 

96.2

%

 

11.6

%

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2018

$

 

8,408

 

$

 

1,431

 

$

 

50

 

$

 

(421

)

$

 

9,468

 

 

 

 

 

 

 

NPM Adjustment Items - 2018

 

(145

)

 

 

 

 

(145

)

Asset impairment, exit and implementation costs - 2018

 

83

 

 

23

 

 

54

 

 

290

 

 

450

 

Tobacco and health litigation items - 2018

 

103

 

 

10

 

 

 

 

113

 

 

 

41

 

 

33

 

 

54

 

 

290

 

 

418

 

 

 

 

 

 

 

Asset impairment, exit, implementation and
acquisition-related costs - 2019

 

(92

)

 

(26

)

 

(76

)

 

(4

)

 

(198

)

Tobacco and health litigation items - 2019

 

(72

)

 

 

 

 

(72

)

 

 

(164

)

 

(26

)

 

(76

)

 

(4

)

 

(270

)

Operations

 

724

 

 

142

 

 

(31

)

 

119

 

 

954

 

For the year ended December 31, 2019

$

 

9,009

 

$

 

1,580

 

$

 

(3

)

$

 

(16

)

$

 

10,570

 

 

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,

 

2019

 

2018

 

2019

 

2018

The segment detail of excise taxes on products sold is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Smokeable products

$

1,168

 

 

$

1,291

 

 

$

5,166

 

 

$

5,585

 

Smokeless products

31

 

 

31

 

 

127

 

 

131

 

Wine

6

 

 

6

 

 

21

 

 

21

 

 

$

1,205

 

 

$

1,328

 

 

$

5,314

 

 

$

5,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Smokeable products

$

983

 

 

$

991

 

 

$

4,178

 

 

$

4,190

 

Smokeless products

3

 

 

2

 

 

10

 

 

9

 

 

$

986

 

 

$

993

 

 

$

4,188

 

 

$

4,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The segment detail of FDA user fees included in cost of sales is
as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Smokeable products

$

70

 

 

$

74

 

 

$

288

 

 

$

286

 

Smokeless products

1

 

 

1

 

 

5

 

 

4

 

 

$

71

 

 

$

75

 

 

$

293

 

 

$

290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The detail of earnings from equity investments is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ABI

$

589

 

 

$

131

 

 

$

1,229

 

 

$

890

 

Cronos

270

 

 

 

 

496

 

 

 

 

$

859

 

 

$

131

 

 

$

1,725

 

 

$

890

 

 

Schedule 6

ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings (Losses) and Diluted Earnings (Losses) Per Share - Attributable to Altria Group, Inc.
For the Quarters Ended December 31,
(dollars in millions, except per share data)
(Unaudited)

 

 

 

 

 

 

 

 

 

Net Earnings

 

2019 Net Earnings (Losses)

$

(1,809

)

 

$

(1.00)

2018 Net Earnings (Losses)

$

1,250

 

 

$

0.66

% Change

(100.0)%+

 

(100.0)%+

 

 

 

 

 

 

 

2018 Net Earnings (Losses)

$

1,250

 

 

$

0.66

 

 

 

 

2018 ABI-related special items

54

 

 

0.03

2018 Asset impairment, exit, implementation and acquisition-related costs

427

 

 

0.23

2018 Tobacco and health litigation items

9

 

 

2018 Tax items

45

 

 

0.03

Subtotal 2018 special items

535

 

 

0.29

 

 

 

 

2019 ABI-related special items

288

 

 

0.16

2019 Asset impairment, exit, implementation and acquisition-related costs

(106

)

 

(0.06)

2019 Tobacco and health litigation items

(22

)

 

(0.01)

2019 Impairment of JUUL equity securities

(4,100

)

 

(2.20)

2019 Cronos-related special items

176

 

 

0.06

2019 Tax items

43

 

 

0.03

Subtotal 2019 special items

(3,721

)

 

(2.02)

 

 

 

 

Fewer shares outstanding

 

 

0.01

Change in tax rate

(10

)

 

(0.01)

Operations

137

 

 

0.07

2019 Net Earnings (Losses)

$

(1,809

)

 

$

(1.00)

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)

 

 

 

 

 

 

 

 

Earnings
(Losses)
before
Income
Taxes

Provision
(Benefit) for
Income
Taxes

Net
Earnings
(Losses)

Net Earnings
(Losses)
Attributable to
Altria

Diluted
EPS

2019 Reported

$

(1,223

)

$

591

 

$

(1,814

)

$

(1,809

)

$

(1.00)

ABI-related special items

(364

)

(76

)

(288

)

(288

)

(0.16)

Asset impairment, exit, implementation and
acquisition-related costs

116

 

10

 

106

 

106

 

0.06

Tobacco and health litigation items

29

 

7

 

22

 

22

 

0.01

Impairment of JUUL equity securities

4,100

 

 

4,100

 

4,100

 

2.20

Cronos-related special items

(165

)

11

 

(176

)

(176

)

(0.06)

Tax items

 

43

 

(43

)

(43

)

(0.03)

2019 Adjusted for Special Items

$

2,493

 

$

586

 

$

1,907

 

$

1,912

 

$

1.02

 

 

 

 

 

 

2018 Reported

$

1,710

 

$

459

 

$

1,251

 

$

1,250

 

$

0.66

ABI-related special items

69

 

15

 

54

 

54

 

0.03

Asset impairment, exit implementation and
acquisition-related costs

532

 

105

 

427

 

427

 

0.23

Tobacco and health litigation items

12

 

3

 

9

 

9

 

Tax items

 

(45

)

45

 

45

 

0.03

2018 Adjusted for Special Items

$

2,323

 

$

537

 

$

1,786

 

$

1,785

 

$

0.95

 

 

 

 

 

 

2019 Reported Net Earnings (Losses)

 

 

 

$

(1,809

)

$

(1.00)

2018 Reported Net Earnings (Losses)

 

 

 

$

1,250

 

$

0.66

% Change

 

 

 

(100.0)%+

(100.0)%+

 

 

 

 

 

 

2019 Net Earnings (Losses) Adjusted for Special Items

 

 

$

1,912

 

$

1.02

2018 Net Earnings (Losses) Adjusted for Special Items

 

 

$

1,785

 

$

0.95

% Change

 

 

 

7.1

%

7.4%

 

 

 

Schedule 8

ALTRIA GROUP, INC.

and Subsidiaries

Net Earnings (Losses) and Diluted Earnings (Losses) Per Share - Attributable to Altria Group, Inc.

For the Years Ended December 31,

(dollars in millions, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Net Earnings

 

1

2019 Net Earnings (Losses)

$

(1,293

)

 

$

(0.70

)

2018 Net Earnings (Losses)

$

6,963

 

 

$

3.68

 

% Change

(100.0)%+

 

(100.0)%+

 

 

 

 

 

 

 

2018 Net Earnings (Losses)

$

6,963

 

 

$

3.68

 

 

 

 

 

2018 NPM Adjustment Items

(109

)

 

(0.06

)

2018 Tobacco and health litigation items

98

 

 

0.05

 

2018 ABI-related special items

(68

)

 

(0.03

)

2018 Asset impairment, exit, implementation and acquisition-related costs

432

 

 

0.23

 

2018 (Gain) loss on ABI/SABMiller business combination

26

 

 

0.01

 

2018 Tax items

197

 

 

0.11

 

Subtotal 2018 special items

576

 

 

0.31

 

 

 

 

 

2019 ABI-related special items

280

 

 

0.15

 

2019 Tobacco and health litigation items

(58

)

 

(0.03

)

2019 Asset impairment, exit, implementation and acquisition-related costs

(269

)

 

(0.15

)

2019 Impairment of JUUL equity securities

(8,600

)

 

(4.60

)

2019 Cronos-related special items

(640

)

 

(0.34

)

2019 Tax items

99

 

 

0.05

 

Subtotal 2019 special items

(9,188

)

 

(4.92

)

 

 

 

 

Fewer shares outstanding

 

 

0.04

 

Change in tax rate

(65

)

 

(0.03

)

Operations

421

 

 

0.22

 

2019 Net Earnings (Losses)

$

(1,293

)

 

$

(0.70

)

 
1

Diluted earnings (losses) per share attributable to Altria 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 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)

 

 

 

 

 

 

 

 

Earnings
(losses)
before
Income
Taxes

Provision
(Benefit)
for Income
Taxes

Net
Earnings
(Losses)

Net Earnings
(Losses)
Attributable to
Altria

Diluted
EPS1

2019 Reported

$

766

 

$

2,064

 

$

(1,298

)

$

(1,293

)

$

(0.70)

ABI-related special items

(354

)

(74

)

(280

)

(280

)

(0.15)

Tobacco and health litigation items

77

 

19

 

58

 

58

 

0.03

Asset impairment, exit, implementation and
acquisition-related costs

331

 

62

 

269

 

269

 

0.15

Impairment of JUUL equity securities

8,600

 

 

8,600

 

8,600

 

4.60

Cronos-related special items

928

 

288

 

640

 

640

 

0.34

Tax items

 

99

 

(99

)

(99

)

(0.05)

2019 Adjusted for Special Items

$

10,348

 

$

2,458

 

$

7,890

 

$

7,895

 

$

4.22

 

 

 

 

 

 

2018 Reported

$

9,341

 

$

2,374

 

$

6,967

 

$

6,963

 

$

3.68

NPM Adjustment Items

(145

)

(36

)

(109

)

(109

)

(0.06)

Tobacco and health litigation items

131

 

33

 

98

 

98

 

0.05

ABI-related special items

(85

)

(17

)

(68

)

(68

)

(0.03)

Asset impairment, exit, implementation and
acquisition-related costs

538

 

106

 

432

 

432

 

0.23

(Gain) loss on ABI/SABMiller

business combination

33

 

7

 

26

 

26

 

0.01

Tax items

 

(197

)

197

 

197

 

0.11

2018 Adjusted for Special Items

$

9,813

 

$

2,270

 

$

7,543

 

$

7,539

 

$

3.99

 

 

 

 

 

 

2019 Reported Net Earnings (Losses)

 

 

 

$

(1,293

)

$

(0.70)

2018 Reported Net Earnings (Losses)

 

 

 

$

6,963

 

$

3.68

% Change

 

 

 

(100.0)%+

(100.0)%+

 

 

 

 

 

 

2019 Net Earnings (Losses) Adjusted for Special Items

 

 

$

7,895

 

$

4.22

2018 Net Earnings (Losses) Adjusted for Special Items

 

 

$

7,539

 

$

3.99

% Change

 

 

 

4.7

%

5.8%

1

Diluted earnings (losses) per share attributable to Altria 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 10

ALTRIA GROUP, INC.
and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in millions)
(Unaudited)

 

 

 

 

 

December 31, 2019

 

December 31, 2018

 

 

 

Cash and cash equivalents

$

2,117

 

 

$

1,333

 

Inventories

2,293

 

 

2,331

 

Other current assets

414

 

 

635

 

Property, plant and equipment, net

1,999

 

 

1,938

 

Goodwill and other intangible assets, net

17,864

 

 

17,475

 

Investments in equity securities

23,581

 

 

30,496

 

Other long-term assets

1,003

 

 

1,251

 

Total assets

$

49,271

 

 

$

55,459

 

 

 

 

 

 

 

 

Short-term borrowings

$

 

 

$

12,704

 

Current portion of long-term debt

1,000

 

 

1,144

 

Accrued settlement charges

3,346

 

 

3,454

 

Other current liabilities

3,828

 

 

3,891

 

Long-term debt

27,042

 

 

11,898

 

Deferred income taxes

5,083

 

 

4,993

 

Accrued postretirement health care costs

1,797

 

 

1,749

 

Accrued pension costs

473

 

 

544

 

Other long-term liabilities

345

 

 

254

 

Total liabilities

42,914

 

 

40,631

 

Redeemable noncontrolling interest

38

 

 

39

 

Total stockholders’ equity

6,319

 

 

14,789

 

Total liabilities and stockholders’ equity

$

49,271

 

 

$

55,459

 

 

 

 

 

Total debt

$

28,042

 

 

$

25,746

 

 

 

 

 

 

 

 

Schedule 11

ALTRIA GROUP, INC.

and Subsidiaries

Calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios

For the Twelve Months Ended December 31, 2019

(dollars in millions)

(Unaudited)

 

 

 

 

 

 

 

 

Twelve Months Ended
December 31, 2019

Consolidated Net Earnings (Losses)

 

$

 

(1,298)

Equity earnings and noncontrolling interests, net

 

 

(1,721)

Impairment of JUUL equity securities

 

 

8,600

Loss on Cronos-related financial instruments

 

 

1,442

Dividends from less than 50% owned affiliates

 

 

396

Provision for income taxes

 

 

2,064

Depreciation and amortization

 

 

226

Asset impairment and exit costs

 

 

159

Interest and other debt expense, net

 

 

1,280

Consolidated EBITDA 1

 

$

 

11,148

 

 

 

Current portion of long-term debt

 

$

 

1,000

Long-term debt

 

 

27,042

Total Debt 2

 

 

28,042

Cash and cash equivalents3

 

 

2,117

Net Debt 4

 

$

 

25,925

 

 

 

Ratios:

 

 

Total Debt / Consolidated EBITDA

 

 

2.5

Net Debt / Consolidated EBITDA

 

 

2.3

 
1

Reflects the term “Consolidated EBITDA” as defined in Altria’s senior unsecured revolving credit agreement.

 

2

Reflects total debt as presented on Altria’s Condensed Consolidated Balance Sheet at December 31, 2019. See Schedule 10.

 

3

Reflects cash and cash equivalents as presented on Altria’s Condensed Consolidated Balance Sheet at December 31, 2019. See Schedule 10.

 

4

Reflects total debt, less cash and cash equivalents at December 31, 2019.

 
 

Schedule 12

ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data for Special Items
For the Quarters Ended December 31,
(dollars in millions)
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Cost of
Sales

Marketing,
administration
and research
costs

Asset
impairment
and
exit costs

General
corporate
expenses

Interest and
other debt
expense, net

Net periodic
benefit
(income)
cost,
excluding
service cost

Earnings
from
equity
investments

Impairment
of JUUL
equity
securities

Loss on
Cronos-
related
financial
instruments

2019 Special Items - (Income) Expense

 

 

 

 

 

 

 

 

 

ABI-related special items

$

 

$

 

$

 

$

 

$

 

$

 

$

(364

)

$

 

$

 

Asset impairment, exit, implementation and acquisition
related costs

3

 

8

 

85

 

4

 

(1

)

17

 

 

 

 

Tobacco and health litigation items

 

29

 

 

 

 

 

 

 

 

Impairment of JUUL equity securities

 

 

 

 

 

 

 

4,100

 

 

Cronos-related special items

 

 

 

 

 

 

(280

)

 

115

 

 

 

 

 

 

 

 

 

 

 

2018 Special Items - (Income) Expense

 

 

 

 

 

 

 

 

 

ABI-related special items

$

 

$

 

$

 

$

 

$

 

$

 

$

69

 

$

 

$

 

Asset impairment, exit, implementation and acquisition-
related costs

63

 

 

381

 

82

 

3

 

3

 

 

 

 

Tobacco and health litigation items

 

9

 

 

 

3

 

 

 

 

 

 

Note: This schedule is intended to provide supplemental financial data for certain income and expense items that management believes are not part of underlying operations and their presentation in Altria’s consolidated statements of earnings. This schedule is not intended to provide, or reconcile, non-GAAP financial measures.

 

Schedule 13

ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data for Special Items
For the Years Ended December 31,
(dollars in millions)
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of
Sales

Marketing,
administration
and research
costs

Asset
impairment
and exit
costs

General
corporate
expenses

Corporate
asset
impairment
and exit
costs

Interest
and other
debt
expense,
net

Net
periodic
benefit
(income)
cost,
excluding
service cost

Earnings
from equity
investments

Impairment
of JUUL
equity
securities

Loss on
Cronos-
related
financial
instruments

(Gain) loss on
ABI/SABMiller
business
combination

2019 Special Items - (Income)
Expense

 

 

 

 

 

 

 

 

 

 

 

Tobacco and health litigation
items

$

 

$

72

 

$

 

$

 

$

 

$

5

 

$

 

$

 

$

 

$

 

$

 

ABI-related special items

 

 

 

 

 

 

 

(354

)

 

 

 

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

2

 

38

 

158

 

8

 

1

 

95

 

29

 

 

 

 

 

Impairment of JUUL
equity securities

 

 

 

 

 

 

 

 

8,600

 

 

 

Cronos-related special items

 

 

 

 

 

 

 

(514

)

 

1,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018 Special Items - (Income)
Expense

 

 

 

 

 

 

 

 

 

 

 

NPM Adjustment
Items

$

(145

)

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Tobacco and health litigation items

 

113

 

 

 

 

18

 

 

 

 

 

 

ABI-related special items

 

 

 

 

 

 

 

(85

)

 

 

 

Asset impairment, exit,
implementation and
acquisition-related costs

67

 

 

383

 

82

 

 

3

 

3

 

 

 

 

 

(Gain) loss on ABI/SABMiller
business combination

 

 

 

 

 

 

 

 

 

 

33

 

 

Note: This schedule is intended to provide supplemental financial data for certain income and expense items that management believes are not part of underlying operations and their presentation in Altria’s consolidated statements of earnings. This schedule is not intended to provide, or reconcile, non-GAAP financial measures.

Altria Client Services
Investor Relations
804-484-8222

Altria Client Services
Media Relations
804-484-8897

Source: Altria Group, Inc.



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