Altria Group, Inc. (Altria) (NYSE: MO) today reports its 2021
third-quarter and nine-months business results, announces the
expansion of its existing share repurchase program and narrows its
2021 full-year adjusted diluted earnings per share (EPS)
guidance.
“Altria continued to balance maximizing profitability from our
core tobacco businesses with investing to realize our Vision of
responsibly leading the transition of adult smokers to a smoke-free
future,” said Billy Gifford, Altria’s Chief Executive Officer. “Our
tobacco businesses performed well against difficult year-over-year
comparisons and we’re encouraged by the significant retail share
growth from on! in the third quarter. We also continued to reward
shareholders with a strong and growing dividend and announced today
the expansion of our existing $2.0 billion share repurchase program
to $3.5 billion.”
“We are raising the lower-end of our full-year 2021 guidance and
now expect to deliver adjusted diluted EPS in a range of $4.58 to
$4.62. This range represents a growth rate of 5% to 6% from a $4.36
base in 2020.”
Altria Headline Financials1
($ in millions, except per share data)
Q3 2021
Change vs.
Q3 2020
Q3 YTD 2021
Change vs.
Q3 YTD 2020
Net revenues
$6,786
(4.7)%
$19,758
(0.5)%
Revenues net of excise taxes
$5,531
(2.6)%
$16,025
1.5%
Reported tax rate
17.6%
100.0+ pp
44.9%
3.1 pp
Adjusted tax rate
24.9%
(0.9) pp
24.9%
0.2 pp
Reported diluted EPS2
$(1.48)
(100)%+
$0.46
(66.2)%
Adjusted diluted EPS2
$1.22
2.5%
$3.52
4.5%
1 “Adjusted” financial measures presented in this release
exclude the impact of special items. See “Basis of Presentation”
for more information.
2 “EPS” represents diluted earnings (losses) per share
attributable to Altria.
As previously announced, a conference call with the investment
community and news media will be webcast on October 28, 2021 at
9:00 a.m. Eastern Time. Access to the webcast is available at
www.altria.com/webcasts.
Cash Returns to Shareholders and Capital Markets
Activity
Share Repurchase Program
- Yesterday, Altria’s Board of Directors (Board) authorized the
expansion of Altria’s existing $2 billion share repurchase program
to $3.5 billion. Altria expects to complete the expanded program by
December 31, 2022. Share repurchases depend on marketplace
conditions and other factors, and the program remains subject to
the discretion of Altria’s Board.
- Through September 30, 2021, Altria repurchased:
- 6.7 million shares at an average price of $48.35, for a total
cost of $322 million in the third quarter.
- 20.2 million shares at an average price of $48.17, for a total
cost of $972 million in the first nine months.
- Following the expansion of the share repurchase program, Altria
has approximately $2.5 billion remaining in the $3.5 billion share
repurchase program.
Dividends
- In the third quarter, Altria paid $1.6 billion in
dividends.
- In August, Altria’s Board increased Altria’s regular quarterly
dividend for the 56th time in the past 52 years. Altria’s current
annualized dividend rate is $3.60 per share, representing a
dividend yield of 7.5% as of October 25, 2021.
- Altria maintains its long-term objective of a dividend payout
ratio target of approximately 80% of its adjusted diluted EPS.
Future dividend payments remain subject to the discretion of
Altria’s Board.
Ste. Michelle Wine Estates Transaction
On October 1, 2021, UST LLC completed the sale of its Ste.
Michelle Wine Estates business and received net cash proceeds of
approximately $1.2 billion, which Altria used to partially fund its
expanded share repurchase program. In the third quarter, Altria
recorded a pre-tax charge of $51 million related to the
disposition.
Smoke-free Products Business Platform
Heated Tobacco
- In the third quarter:
- Marlboro HeatSticks retail sales volume increased by over 20%
sequentially, primarily driven by broader distribution outside of
established metro markets and increasing demand in the Northern
Virginia metro market.
- Marlboro HeatSticks achieved a cigarette category retail share
of 1.8% in Northern Virginia stores with distribution for the last
four weeks of the third quarter.
- In September 2021, in the IQOS heated tobacco system patent
proceedings, the International Trade Commission (ITC) imposed an
importation ban and issued cease-and-desist orders (CDO) on IQOS,
Marlboro HeatSticks and infringing components. Altria disagrees
with the ITC’s decision as it believes that the plaintiff’s patents
are invalid and that IQOS does not infringe those patents. The
ITC’s decision is currently under a 60-day review by the Biden
Administration. If the decision is not rejected through the
Administration’s review, the CDO will take effect on November 29,
2021, making all IQOS and Marlboro HeatSticks products unavailable
in the marketplace. PM USA is preparing to comply with the orders.
PM USA is also preparing contingency plans surrounding sales and
distribution, and has been in communication with Philip Morris
International Inc. regarding their domestic manufacturing
plans.
Oral Tobacco
- Total U.S. oral tobacco category share for on! nicotine pouches
grew to 3.0% in the third quarter, an increase of 1.0 percentage
point sequentially and an increase of 1.9 percentage points from
the end of 2020.
- As of September 30, 2021, Helix had broadened the U.S.
distribution of on! to over 110,000 stores.
- Premarket tobacco product applications (PMTA) for the entire
on! portfolio remain pending with the U.S. Food and Drug
Administration (FDA). Helix is actively working on modified risk
tobacco product applications for on!.
- In October 2021, the FDA authorized the marketing of Verve
Discs and Verve Chews in the flavors of Green Mint and Blue Mint
and determined that the marketing of these products is appropriate
for the protection of public health. This is the first flavored
product authorization issued by the FDA for newly deemed tobacco
products. While Verve products are not currently in market, Altria
believes it gained learnings from developing the Verve PMTA
submission that it used to file its May 2020 PMTA submissions for
on!, nine months after Altria closed the on! transaction.
ABI Investment
Impact of COVID-19 Pandemic and Pre-Tax Impairment
Charge
- The fair value of Altria’s investment in ABI has been below its
carrying value since October 2019 and has not fully recovered. At
September 30, 2021, the fair value of Altria’s investment in ABI
was below its carrying value by 35%.
- ABI continued to be impacted by the COVID-19 pandemic,
including the effects of COVID-19 variants, supply-chain
constraints across certain markets, transactional foreign exchange
and commodity cost headwinds.
- In preparing Altria’s financial statements for the period ended
September 30, 2021, Altria considered the factors discussed above
and Altria’s expectation for ABI’s recovery. While Altria continues
to believe that ABI’s share price will recover, Altria concluded
that a full recovery to its carrying value will take longer than
previously expected.
- As a result of Altria’s evaluation and in accordance with
applicable accounting guidance, Altria determined that the decline
in fair value of its investment in ABI as of September 30, 2021 was
“other than temporary.” Therefore, Altria recorded a non-cash
pre-tax impairment charge of approximately $6.2 billion for the
three and nine months ended September 30, 2021, reflecting the
difference between the fair value of Altria’s investment in ABI
using ABI’s share price at September 30, 2021 and the carrying
value of Altria’s investment in ABI at September 30, 2021.
Strategic Review of ABI Investment
The five-year transfer restriction of the 185 million ABI shares
that Altria received in the 2016 ABI and SABMiller plc business
combination expired on October 10, 2021.
Altria views its ABI stake as a financial investment and is
focused on maximizing the long-term shareholder value of the
investment. In anticipation of the expiration of the lock-up,
Altria conducted an in-depth analysis of its investment in ABI
considering a range of factors, including: (i) the strategic
rationale for continuing as a long-term investor in the beer
category; (ii) ABI’s share price (which has declined by more than
30% since October 2019 due in large part to the effects of the
COVID-19 pandemic on its business); (iii) expectations for ABI’s
business; (iv) alternative uses of capital; and (v) tax
considerations.
Altria determined that selling its investment in ABI at this
time would not maximize long-term shareholder value; therefore,
Altria currently plans to maintain its ABI investment. Altria
continues to have confidence in ABI’s (i) long-term strategies;
(ii) premium global brands; (iii) experienced management team; and
(iv) capability to successfully navigate near-term challenges.
Altria will continue to monitor and evaluate market conditions
and the analytical factors described above on a regular basis, in
accordance with its goal of maximizing the long-term shareholder
value of this investment.
Environmental, Social and Governance (ESG)
Altria’s Corporate Responsibility Focus Areas are (i) reducing
the harm of tobacco products, (ii) preventing underage use, (iii)
protecting the environment, (iv) driving responsibility through our
value chain, (v) supporting our people and communities and (vi)
engaging and leading responsibly. Altria’s corporate responsibility
reports can be found on the Corporate Responsibility Reports page
at www.altria.com/responsibility.
- In October, Altria released its 2020-2021 Reducing Harm and
Preventing Underage Use corporate responsibility report.
- In support of its underage use prevention efforts, Altria
announced its sponsorship of TruAge™, a digital age-verification
system. Built for any store or brand that sells age-restricted
products, TruAge™ verifies a customer’s age at all points of sale
while keeping personal information private. Altria expects a pilot
to be initiated by year-end.
- In the third quarter, Altria was recognized as a Great Place to
Work Certified™ company and was ranked as a Best Workplace for
Millennials and in Manufacturing and Production by Fortune magazine
and Great Place to Work®. Altria was also recognized as one of the
best places to work in IT by IDG Insider Pro and
ComputerWorld.
- In support of its Talent and Culture initiative, Altria Group
Distribution Company launched The Stronger Together Challenge, an
industry program to fund proposals that amplify inclusion,
diversity and equity efforts in the convenience store
industry.
- In November, Altria expects to issue its 2020-2021 Protect the
Environment corporate responsibility report.
Impact of COVID-19 Pandemic
Impact on Tobacco Business Operations
- Altria’s tobacco businesses have not experienced a material
adverse impact to date due to the COVID-19 pandemic, but there is
continued uncertainty as to how the COVID-19 pandemic (including
changes in COVID-19-related restrictions and guidelines) may impact
adult tobacco consumers (ATC) in the future. Altria continues to
monitor the macroeconomic risks of the COVID-19 pandemic (including
risks associated with the timing and extent of vaccine
administration and the impact of COVID-19 variants), and their
effect on ATC, including stay-at-home practices and disposable
income, which may be further impacted by unemployment rates and
inflation. Altria also continues to monitor ATC purchasing
behaviors, including overall tobacco product expenditures, mix
between premium and discount brand purchases and adoption of
smoke-free products.
- Altria believes that the COVID-19 pandemic altered ATC
behaviors and purchasing patterns, particularly in the earlier
stages of the pandemic. While the number of ATC trips to the store
remain below pre-pandemic levels and tobacco expenditures per trip
remain elevated, the environment continues to evolve as the effects
of government stimulus have lessened and consumer mobility returns
to more normal levels.
- Altria’s suppliers and those within its distribution chain
continue to be subject to potential facility closures, remote
working protocols, and labor shortages. To date, Altria has not
experienced any material disruptions to its supply chains or
distribution systems but is continuing to monitor these factors.
Altria continues to monitor the risk that the business of one or
more suppliers, distributors or any other entities within its
supply and distribution chains may be disrupted.
Impact on JUUL and Cronos Investments
- During 2020 and the first nine months of 2021, JUUL’s
operations were negatively impacted by the COVID-19 pandemic due to
stay-at-home practices and government-mandated restrictions. While
the impact was considered in Altria’s quantitative valuations
conducted in connection with the preparation of its financial
statements for the nine months ended September 30, 2021 and during
2020, Altria does not believe the COVID-19 pandemic was a primary
driver of the non-cash, pre-tax impairment charge recorded during
2020 or any quarterly changes in fair value recorded since the
fourth quarter of 2020. Altria will continue to monitor the impact
of the COVID-19 pandemic on JUUL’s business, including near-term
supply chain constraints and component part shortages.
- During 2020 and the first nine months of 2021, Cronos has been
adversely impacted by the COVID-19 pandemic, due in part to
government actions limiting access to retail stores in the United
States and Canada, including the recording in 2020 of an impairment
charge on certain goodwill and intangible assets. However, the
continued rollout of vaccines in the United States and Canada has
resulted in the easing of COVID-19 related restrictions in most of
the United States and Canada during the third quarter of 2021.
Altria will continue to monitor the impact of COVID-19 pandemic on
Cronos’ business, including near-term supply chain challenges, and
market valuation.
2021 Full-Year Guidance
Altria narrows its guidance for 2021 full-year adjusted diluted
EPS to be in a range of $4.58 to $4.62, representing a growth rate
of 5% to 6% from an adjusted diluted EPS base of $4.36 in 2020.
While the 2021 full-year adjusted diluted EPS guidance accounts for
a range of scenarios, the external environment remains dynamic.
Altria will continue to monitor conditions related to (i) the
economy (including unemployment rates and the impact of increased
inflation), (ii) ATC dynamics, including stay-at-home practices,
disposable income, purchasing patterns and adoption of smoke-free
products, (iii) regulatory and legislative (including excise tax)
developments and (iv) the timing and extent of COVID-19 vaccine
administration and the impact of COVID-19 variants.
Altria’s 2021 full-year adjusted diluted EPS guidance range
includes planned investments in support of its Vision, such as (i)
marketplace investments to expand the availability and awareness of
Altria’s smoke-free products, (ii) costs associated with building
an industry-leading consumer engagement platform that enhances data
collection and insights in support of ATC transition to smoke-free
products and (iii) increased smoke-free product research and
development expense. The full-year adjusted diluted EPS guidance
range excludes the special items for the first nine months of 2021
shown in Table 1.
Altria continues to expect its 2021 full-year adjusted effective
tax rate will be in a range of 24.5% to 25.5%.
Altria expects its 2021 capital expenditures to be between $150
million and $200 million, a change from its previous expectation of
$200 million to $250 million.
Altria’s full-year adjusted diluted EPS guidance and full-year
forecast for its adjusted effective tax rate exclude the impact of
certain income and expense items that management believes are not
part of underlying operations. These items may include, for
example, loss on early extinguishment of debt, restructuring
charges, asset impairment charges, acquisition-related and
disposition-related costs, COVID-19 special items, equity
investment-related special items (including any changes in fair
value of the equity investment and any related warrants and
preemptive rights), certain tax items, charges associated with
tobacco and health and certain other litigation items, and
resolutions of certain non-participating manufacturer (NPM)
adjustment disputes under the 1998 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.
ALTRIA GROUP, INC.
See “Basis of Presentation” below for an explanation of
financial measures and reporting segments discussed in this
release.
Financial Performance
Third Quarter
- Net revenues decreased 4.7% to $6.8 billion, primarily driven
by lower net revenues in the smokeable products segment. Revenues
net of excise taxes decreased 2.6% to $5.5 billion.
- Reported diluted EPS decreased (+100.0)% to ($1.48), primarily
driven by lower reported earnings from Altria’s investment in ABI
(due primarily to 2021 impairment of its investment in ABI) and
lower reported operating companies income (OCI). These items were
partially offset by the 2020 impairment of JUUL equity securities,
an increase in the estimated fair value of Altria’s investment in
JUUL, favorable Cronos-related special items, favorable net
periodic benefit income, lower interest expense and fewer shares
outstanding.
- Adjusted diluted EPS increased 2.5% to $1.22, primarily driven
by higher adjusted earnings from Altria’s equity investment in ABI,
favorable net periodic benefit income, lower adjusted income tax
rate, lower interest expense and fewer shares outstanding,
partially offset by lower adjusted OCI.
First Nine Months
- Net revenues decreased 0.5% to $19.8 billion, primarily driven
by lower net revenues in the smokeable products segment, partially
offset by higher net revenues in the wine segment, oral tobacco
segment and the financial services business. Revenues net of excise
taxes increased 1.5% to $16.0 billion.
- Reported diluted EPS decreased 66.2% to $0.46, primarily driven
by lower reported earnings from Altria’s investment in ABI (due
primarily to 2021 impairment of its investment in ABI), losses on
early extinguishment of debt and unfavorable Cronos-related special
items. These items were partially offset by the 2020 impairment of
JUUL equity securities, higher reported OCI, favorable periodic net
benefit income and fewer shares outstanding.
- Adjusted diluted EPS increased 4.5% to $3.52, primarily driven
by higher adjusted OCI in the smokeable products segment, favorable
net periodic benefit income, higher adjusted earnings from Altria’s
investment in ABI and fewer shares outstanding, partially offset by
a higher adjusted income tax rate.
Table 1 - Altria’s Adjusted
Results
Third Quarter
Nine Months Ended September
30,
2021
2020
Change
2021
2020
Change
Reported diluted EPS
$
(1.48)
$
(0.51)
(100)%+
$
0.46
$
1.36
(66.2) %
NPM Adjustment Items
(0.02)
—
(0.03)
—
Implementation, acquisition and
disposition-
related costs
0.03
—
0.05
0.17
Tobacco and health and certain other
litigation items
0.04
0.01
0.06
0.03
Impairment of JUUL equity securities
—
1.40
—
1.40
JUUL changes in fair value
(0.05)
—
—
—
ABI-related special items
2.65
0.22
2.60
0.29
Cronos-related special items
0.05
0.08
0.11
0.08
Loss on early extinguishment of debt
—
—
0.27
—
COVID-19 special items
—
—
—
0.02
Tax items
—
(0.01)
—
0.02
Adjusted diluted EPS
$
1.22
$
1.19
2.5
%
$
3.52
$
3.37
4.5
%
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 6, 7, 8 and 9.
Non-Participating Manufacturer (NPM) Adjustment Items
- In the third quarter and first nine months of 2021, Altria
recorded pre-tax income of $44 million (or $0.02 per share) and $76
million (or $0.03 per share), respectively, due to NPM Adjustment
Items and related interest. For the third quarter and first nine
months, Altria recorded $21 and $53 million, respectively, as a
reduction to cost of sales in the smokeable products segment, and
recorded $23 million as interest income in both periods.
Implementation, acquisition and disposition-related
costs
- In the third quarter of 2021, Altria recorded pre-tax charges
of $61 million (or $0.03 per share), due primarily to charges
associated with the sale of the Ste. Michelle wine business.
- In the first nine months of 2021, Altria recorded pre-tax
charges of $117 million (or $0.05 per share), due primarily to
charges associated with the sale of the Ste. Michelle wine business
and acquisition-related costs for the settlement of an arbitration
related to the 2019 on! transaction.
- In the first nine months of 2020, Altria recorded pre-tax
charges of $415 million (or $0.17 per share), due primarily to
inventory-related charges recorded by Ste. Michelle consisting of
$292 million for a wine inventory write-off and $100 million for
estimated losses on future, non-cancelable grape purchase
commitments (both recorded in the first quarter of 2020) that Ste.
Michelle believed no longer had a future economic benefit.
Tobacco and Health and Certain Other Litigation Items
- In the third quarter and first nine months of 2021, Altria
recorded pre-tax charges of $105 million (or $0.04 per share) and
$148 million (or $0.06 per share), respectively, for tobacco and
health and certain other litigation items and interest costs.
- In the first nine months of 2020, Altria recorded pre-tax
charges of $76 million (or $0.03 per share) for tobacco and health
litigation items and interest costs.
Impairment of JUUL Equity Securities
- In the third quarter and first nine months of 2020, Altria
recorded a non-cash pre-tax impairment charge of $2.6 billion
($1.40 per share) due to 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.
JUUL Changes in Fair Value
- In the third quarter of 2021, Altria recorded a non-cash
pre-tax unrealized gain of $100 million (or $0.05 per share) as a
result of an increase in the estimated fair value of its investment
in JUUL. A corresponding adjustment was made to the JUUL tax
valuation allowance.
- As of September 30, 2021, the estimated fair value of Altria’s
JUUL investment was $1.7 billion, unchanged from its December 31,
2020 estimated fair value.
ABI-Related Special Items
- In the third quarter and first nine months of 2021, equity
earnings from ABI included net pre-tax charges of $6.2 billion
($2.65) and $6.1 billion ($2.60), respectively, substantially all
of which related to an impairment of Altria’s investment in
ABI.
- In the third quarter of 2020, losses from Altria’s investment
in ABI included net pre-tax charges of $513 million (or $0.22 per
share), consisting primarily of ABI’s completion of the sale of its
Australia subsidiary and ABI’s goodwill impairment charge
associated with its Africa businesses.
- In the first nine months of 2020, losses from Altria’s
investment in ABI included net pre-tax charges of $689 million (or
$0.29 per share), consisting primarily of ABI’s (i) mark-to-market
losses on certain ABI financial instruments associated with its
share commitments, (ii) completion of the sale of its Australia
subsidiary and (iii) goodwill impairment charge associated with its
Africa businesses.
The ABI-related special items above include Altria’s respective
share of the amounts recorded by ABI and may also include
additional adjustments related to (i) conversion from international
financial reporting standards to GAAP and (ii) adjustments to
Altria’s investment required under the equity method of
accounting.
Cronos-Related Special Items
In the third quarter and first nine months of 2021, Altria
recorded net pre-tax (income) expense consisting of the
following:
Third Quarter
Nine Months Ended September
30,
($ in millions, except per
share data)
2021
2020
2021
2020
(Gain) loss on Cronos-related
financial
instruments 1
$
135
$
105
$
128
$
202
(Income) losses from equity investments
2
(46)
38
72
(58)
Total Cronos-related special items -
(income)
expense
$
89
$
143
$
200
$
144
Earnings per share
$
0.05
$
0.08
$
0.11
$
0.08
1 Amounts are related to the non-cash change in the fair value
of the warrant and certain anti-dilution protections acquired in
the Cronos transaction.
2 Amounts include Altria’s share of special items recorded by
Cronos and may also include adjustments to Altria’s investment
required under the equity method of accounting.
Loss on Early Extinguishment of Debt
- In the first nine months of 2021, Altria recorded pre-tax
losses on early extinguishment of debt of $649 million (or $0.27
per share), which was recorded in the first quarter.
COVID-19 Special Items
- In the first nine months of 2020, Altria recorded net pre-tax
charges of $50 million (or $0.02 per share), directly related to
disruptions caused by or efforts to mitigate the impact of the
COVID-19 pandemic. These net pre-tax charges included premium pay,
personal protective equipment and health screenings, partially
offset by certain employment tax credits. The COVID-19 special
items do not include the inventory-related implementation costs
associated with the 2020 wine business strategic reset.
Tax Items
- In the first nine months of 2020, Altria recorded net income
tax expense of $38 million (or $0.02 per share), primarily related
to a tax basis adjustment to Altria’s investment in ABI and
adjustments as a result of amended returns and audit adjustments
related to prior years.
SMOKEABLE PRODUCTS
Revenues and OCI
Third Quarter
- Net revenues decreased 5.4%, primarily driven by lower shipment
volume, partially offset by higher pricing and lower promotional
investments. Revenues net of excise taxes decreased 3.0%.
- Reported OCI decreased 1.3%, primarily driven by lower shipment
volume and higher resolution expense, partially offset by higher
pricing, lower promotional investments and 2021 NPM Adjustment
Items.
- Adjusted OCI decreased 2.2%, primarily driven by lower shipment
volume and higher resolution expense, partially offset by higher
pricing and lower promotional investments. Adjusted OCI margins
increased by 0.5 percentage points to 58.0%.
First Nine Months
- Net revenues decreased 1.4%, primarily driven by lower shipment
volume, partially offset by higher pricing. Revenues net of excise
taxes increased 0.6%.
- Reported OCI increased 3.8%, primarily driven by higher
pricing, 2021 NPM Adjustment Items and 2020 COVID-19 special items,
partially offset by lower shipment volume, higher resolution
expenses and higher costs.
- Adjusted OCI increased 2.6%, primarily driven by higher
pricing, partially offset by lower shipment volume, higher
resolution expenses and higher costs. Adjusted OCI margins
increased by 1.1 percentage points to 58.0%.
Table 2 - Smokeable Products: Revenues
and OCI ($ in millions)
Third Quarter
Nine Months Ended September
30,
2021
2020
Change
2021
2020
Change
Net revenues
$
5,975
$
6,313
(5.4)%
$
17,275
$
17,522
(1.4)%
Excise taxes
(1,218)
(1,407)
(3,620)
(3,950)
Revenues net of excise taxes
$
4,757
$
4,906
(3.0)%
$
13,655
$
13,572
0.6%
Reported OCI
$
2,753
$
2,789
(1.3)%
$
7,901
$
7,609
3.8%
NPM Adjustment Items
(21)
—
(53)
—
Tobacco and health and certain other
litigation items
29
34
72
73
COVID-19 special items
—
—
—
41
Adjusted OCI
$
2,761
$
2,823
(2.2)%
$
7,920
$
7,723
2.6%
Adjusted OCI margins 1
58.0
%
57.5
%
0.5 pp
58.0
%
56.9
%
1.1 pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
Shipment Volume
Third Quarter
- Smokeable products segment reported domestic cigarette shipment
volume decreased 12.9%, primarily driven by the industry’s rate of
decline and trade inventory movements.
- When adjusted for trade inventory movements, smokeable products
segment domestic cigarette shipment volume decreased by an
estimated 7.0%.
- When adjusted for trade inventory movements and other factors,
total estimated domestic cigarette industry volume decreased by an
estimated 6.5%.
- Reported cigar shipment volume decreased 9.8%.
First Nine Months
- Smokeable products segment reported domestic cigarette shipment
volume decreased 8.0%, primarily driven by the industry’s rate of
decline, trade inventory movements, calendar differences and other
factors.
- When adjusted for trade inventory movements, calendar
differences and other factors, smokeable products segment domestic
cigarette shipment volume decreased by an estimated 5.0%.
- When adjusted for trade inventory movements, calendar
differences and other factors, total estimated domestic cigarette
industry volume decreased by an estimated 5.0%.
- Reported cigar shipment volume increased 2.7%.
Table 3 - Smokeable Products: Shipment
Volume (sticks in millions)
Third Quarter
Nine Months Ended September
30,
2021
2020
Change
2021
2020
Change
Cigarettes:
Marlboro
21,368
24,258
(11.9)
%
63,122
67,890
(7.0)
%
Other premium
1,042
1,231
(15.4)
%
3,180
3,496
(9.0)
%
Discount
1,640
2,130
(23.0)
%
5,068
6,205
(18.3)
%
Total cigarettes
24,050
27,619
(12.9)
%
71,370
77,591
(8.0)
%
Cigars:
Black & Mild
424
468
(9.4)
%
1,356
1,317
3.0
%
Other
1
3
(66.7)
%
5
8
(37.5)
%
Total cigars
425
471
(9.8)
%
1,361
1,325
2.7
%
Total smokeable products
24,475
28,090
(12.9)
%
72,731
78,916
(7.8)
%
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
Third Quarter
- Marlboro retail share of the total cigarette category was
unchanged at 43.2%.
- The industry retail share for the discount cigarette segment
increased 0.6 share points to 25.3%.
First Nine Months
- Marlboro retail share of the total cigarette category increased
0.4 share points to 43.2%.
- The industry retail share for the discount cigarette segment
increased 0.3 share points to 25.2%.
Table 4 - Smokeable Products:
Cigarettes Retail Share (percent)
Third Quarter
Nine Months Ended September
30,
2021
2020
Percentage point
change
2021
2020
Percentage point
change
Cigarettes:
Marlboro
43.2
%
43.2
%
—
43.2
%
42.8
%
0.4
Other premium
2.3
2.3
—
2.3
2.3
—
Discount
3.4
3.8
(0.4)
3.5
4.0
(0.5)
Total cigarettes
48.9
%
49.3
%
(0.4)
49.0
%
49.1
%
(0.1)
Note: Retail share results for cigarettes are based on data from
IRI/MSAi, a tracking service that uses a sample of stores and
certain wholesale shipments to project market share and depict
share trends. This service tracks sales in the food, drug, mass
merchandisers, convenience, military, dollar store and club trade
classes. For other trade classes selling cigarettes, retail share
is based on shipments from wholesalers to retailers (STARS). This
service is not designed to capture sales through other channels,
including the internet, direct mail and some illicitly
tax-advantaged outlets. It is IRI’s standard practice to
periodically refresh its services, which could restate retail share
results that were previously released in this service.
ORAL TOBACCO PRODUCTS
Revenues and OCI
Third Quarter
- Net revenues decreased 2.2%, primarily driven by lower shipment
volume (including changes in shipment volume mix between the
segment’s moist smokeless tobacco (MST) and oral nicotine pouch
products), and higher promotional investments in on!, partially
offset by higher pricing. Revenues net of excise taxes decreased
2.1%.
- Reported and adjusted OCI decreased 7.1% and 8.0%,
respectively, primarily driven by lower shipment volume (including
unfavorable shipment volume mix), higher promotional investments in
on! and higher costs, partially offset by higher pricing. Adjusted
OCI margins declined by 4.3 percentage points to 68.2%, due to
changes in shipment volume mix between the segment’s MST and oral
nicotine pouch products.
First Nine Months
- Net revenues increased 2.3%, primarily driven by higher
pricing, partially offset by higher promotional investments in on!
and lower shipment volume (including unfavorable shipment volume
mix). Revenues net of excise taxes increased 2.4%.
- Reported OCI decreased 2.2% primarily driven by higher
promotional investments in on!, higher costs (including
acquisition-related costs) and lower shipment volume (including
unfavorable shipment volume mix), partially offset by higher
pricing.
- Adjusted OCI was essentially unchanged, as higher promotional
investments in on!, lower shipment volume (including unfavorable
shipment volume mix) and higher costs were mostly offset by higher
pricing. Adjusted OCI margins declined by 2.1 percentage points to
70.7%, due to changes in shipment volume mix between the segment’s
MST and oral nicotine pouch products.
Table 5 - Oral Tobacco Products:
Revenues and OCI ($ in millions)
Third Quarter
Nine Months Ended September
30,
2021
2020
Change
2021
2020
Change
Net revenues
$
626
$
640
(2.2)
%
$
1,945
$
1,901
2.3
%
Excise taxes
(32)
(33)
(98)
(98)
Revenues net of excise taxes
$
594
$
607
(2.1)
%
$
1,847
$
1,803
2.4
%
Reported OCI
$
405
$
436
(7.1)
%
$
1,269
$
1,297
(2.2)
%
Acquisition-related costs
—
4
37
6
COVID-19 special items
—
—
—
9
Adjusted OCI
$
405
$
440
(8.0)
%
$
1,306
$
1,312
(0.5)
%
Adjusted OCI margins 1
68.2
%
72.5
%
(4.3) pp
70.7
%
72.8
%
(2.1) pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
Shipment Volume
Third Quarter
- Oral tobacco products segment reported domestic shipment volume
decreased 3.8%, primarily driven by retail share losses (primarily
due to the growth of oral nicotine pouches) and trade inventory
movements, partially offset by industry growth, calendar
differences and other factors. When adjusted for trade inventory
movements and calendar differences, oral tobacco products segment
shipment volume decreased by an estimated 2.5%.
First Nine Months
- Oral tobacco products segment reported domestic shipment volume
decreased 0.5%, primarily driven by retail share losses (primarily
due to the growth of oral nicotine pouches) and calendar
differences, partially offset by industry growth and trade
inventory movements. When adjusted for trade inventory movements
and calendar differences, oral tobacco products segment shipment
volume decreased by an estimated 0.5%.
- Total oral tobacco industry volume increased by an estimated 3%
over the past six months, driven by growth in oral nicotine
pouches.
Table 6 - Oral Tobacco Products:
Shipment Volume (cans and packs in millions)
Third Quarter
Nine Months Ended September
30,
2021
2020
Change
2021
2020
Change
Copenhagen
121.4
131.1
(7.4)
%
378.4
395.0
(4.2)
%
Skoal
47.7
52.3
(8.8)
%
148.2
157.2
(5.7)
%
Other (includes Red Seal and
on!)
29.7
23.3
27.5
%
87.7
65.0
34.9
%
Total oral tobacco products
198.8
206.7
(3.8)
%
614.3
617.2
(0.5)
%
Note: Volume includes cans and packs sold, as well as
promotional units, but excludes international volume, which is
currently not material to the oral tobacco products segment. New
types of oral tobacco products, as well as new packaging
configurations of existing oral tobacco products, may or may not be
equivalent to existing MST products on a can-for-can basis. To
calculate volumes of cans and packs shipped, one pack of snus or
one can of oral nicotine pouches, irrespective of the number of
pouches in the pack, is assumed to be equivalent to one can of
MST.
Retail Share & Brand Activity
Third Quarter
- Oral tobacco products segment retail share was 47.8% and
Copenhagen continued to be the leading oral tobacco brand with a
retail share of 29.2%. Share losses in the oral tobacco products
segment, including Copenhagen, were due to the growth of oral
nicotine pouches.
First Nine Months
- Oral tobacco products segment retail share was 47.9% and
Copenhagen retail share was 29.8%. Share losses in the oral tobacco
products segment, including Copenhagen, were due to the growth of
oral nicotine pouches.
Table 7 - Oral Tobacco Products: Retail
Share (percent)
Third Quarter
Nine Months Ended September
30,
2021
2020
Percentage point
change
2021
2020
Percentage point
change
Copenhagen
29.2
%
31.8
%
(2.6)
29.8
%
32.1
%
(2.3)
Skoal
12.5
13.7
(1.2)
12.7
14.1
(1.4)
Other (includes Red Seal and
on!)
6.1
4.5
1.6
5.4
3.9
1.5
Total oral tobacco products
47.8
%
50.0
%
(2.2)
47.9
%
50.1
%
(2.2)
Note: The oral tobacco products retail share results exclude
international volume. Retail share results for oral tobacco
products are based on data from IRI InfoScan, a tracking service
that uses a sample of stores to project market share and depict
share trends. This service tracks sales in the food, drug, mass
merchandisers, convenience, military, dollar store and club trade
classes on the number of cans and packs sold. Oral tobacco products
is defined by IRI as moist smokeless, snus and oral nicotine
pouches. New types of oral tobacco products, as well as new
packaging configurations of existing oral tobacco products, may or
may not be equivalent to existing MST products on a can-for-can
basis. For example, one pack of snus or one can of oral nicotine
pouches, irrespective of the number of pouches in the pack, is
assumed to be equivalent to one can of MST. Because this service
represents retail share performance only in key trade channels, it
should not be considered a precise measurement of actual retail
share. It is IRI’s standard practice to periodically refresh its
InfoScan services, which could restate retail share results that
were previously released in this service.
WINE
Revenues, OCI and Shipment Volume
Third Quarter
- Net revenues increased 12.7%, primarily driven by improved mix
and higher pricing.
- Reported OCI decreased +100.0% to ($24) million, primarily
driven by 2021 disposition-related charges associated with the sale
of the wine business, partially offset by higher pricing and
improved mix.
- Adjusted OCI increased 35.0% to $27 million, primarily driven
by higher pricing and improved mix.
- Reported wine shipment volume decreased 2.6% to approximately
1.8 million cases.
First Nine Months
- Net revenues increased 13.8%, primarily driven by higher
shipment volume, improved mix and higher pricing.
- Reported OCI increased +100.0% to $21 million, primarily driven
by 2020 inventory-related charges (included in implementation costs
in Table 8 below), higher shipment volume, improved mix and higher
pricing, partially offset by 2021 disposition-related charges.
- Adjusted OCI increased 52.1% to $73 million, primarily driven
by higher shipment volume, improved mix and higher pricing.
- Reported wine shipment volume increased 5.1% to approximately
5.4 million cases.
Table 8 - Wine: Revenues and OCI (Loss)
($ in millions)
Third Quarter
Nine Months Ended September
30,
2021
2020
Change
2021
2020
Change
Net revenues
$
177
$
157
12.7 %
$
494
$
434
13.8 %
Excise taxes
(5)
(5)
(14)
(14)
Revenues net of excise taxes
$
172
$
152
13.2 %
$
480
$
420
14.3 %
Reported OCI (Loss)
$
(24)
$
19
(100%)+
$
21
$
(347)
100%+
Implementation and disposition-related
costs
51
1
52
395
Adjusted OCI
$
27
$
20
35.0 %
$
73
$
48
52.1 %
Adjusted OCI margins 1
15.7
%
13.2
%
2.5 pp
15.2
%
11.4
%
3.8 pp
1 Adjusted OCI margins are calculated as adjusted OCI divided by
revenues net of excise taxes.
Altria’s Profile
Altria has a leading portfolio of tobacco products for U.S.
tobacco consumers age 21+. Altria’s Vision by 2030 is to
responsibly lead the transition of adult smokers to a smoke-free
future (Vision). Altria is Moving Beyond Smoking™, leading the way
in moving adult smokers away from cigarettes by taking action to
transition millions to potentially less harmful choices - believing
it is a substantial opportunity for adult tobacco consumers,
Altria’s businesses and society.
Altria’s wholly owned subsidiaries include the most profitable
tobacco companies in their categories: Philip Morris USA Inc. (PM
USA), U.S. Smokeless Tobacco Company LLC (USSTC) and John Middleton
Co. (Middleton). Altria’s smoke-free portfolio includes Helix
Innovations LLC (Helix), the maker of on! oral nicotine pouches,
exclusive U.S. commercialization rights to the IQOS Tobacco Heating
System® and Marlboro HeatSticks®, and an equity investment in JUUL
Labs, Inc. (JUUL).
Altria also owns equity investments in Anheuser-Busch InBev
SA/NV (ABI), the world’s largest brewer, and Cronos Group Inc.
(Cronos), a leading Canadian cannabinoid company.
The brand portfolios of Altria’s tobacco operating companies
include Marlboro®, Black & Mild®, Copenhagen®, Skoal® and on!®.
Trademarks and service marks related to Altria referenced in this
release are the property of Altria or its subsidiaries or are used
with permission.
Learn more about Altria at www.altria.com and follow us on Twitter, Facebook
and LinkedIn.
Basis of Presentation
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 “2021 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. In the fourth quarter of 2020, Altria elected
to account for its investment in JUUL under the fair value option.
Prior to this date, Altria accounted for its investment in JUUL as
an investment in an equity security.
Altria’s reportable segments are smokeable products, including
combustible cigarettes and cigars manufactured and sold by PM USA
and Middleton; oral tobacco products, including MST and snus
products manufactured and sold by USSTC, and oral nicotine pouches
sold by Helix; and wine, produced and/or distributed by Ste.
Michelle Wine Estates. Results for innovative tobacco products and
Philip Morris Capital Corporation (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, 2020 and its Quarterly
Report on Form 10-Q for the period ended June 30, 2021. 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’ or 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 FDA) and private sector actions that
impact adult tobacco consumer acceptability of, or access to,
tobacco products;
- tobacco product taxation, including lower tobacco product
consumption levels and potential shifts in adult consumer purchases
as a result of federal, state and local excise tax increases;
- unfavorable outcomes of any government investigations of
Altria, our subsidiaries or investees;
- a successful challenge to our tax positions, an increase to the
corporate income tax rate or other changes to federal or state tax
laws;
- the risks related to our and our investees’ international
business operations, including failure to prevent violations of
various U.S. and foreign laws and regulations such as foreign
privacy laws and laws prohibiting bribery and corruption;
- the risks associated with health epidemics and pandemics,
including the COVID-19 pandemic and similar outbreaks, such as
their impact on our financial performance and financial condition
and on our subsidiaries’ and investees’ ability to continue
manufacturing and distributing products, including as a result of
labor shortages, and the impact of health epidemics and pandemics
on general economic conditions (including any resulting recession
or other economic crisis) and, in turn, adult consumer purchasing
behavior, which may be further adversely impacted by any reductions
in, or eliminations of, government stimulus or unemployment
payments;
- the failure of our tobacco subsidiaries and our investees to
compete effectively in their respective markets;
- the growth of the e-vapor category and other innovative tobacco
products, including oral nicotine pouches, contributing to
reductions in cigarette and MST consumption levels and sales
volume;
- our tobacco subsidiaries’ and our investees’ 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 (due to the COVID-19
pandemic or otherwise), that result in adult consumers choosing
lower-priced brands, including discount 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 cigarettes and other traditional tobacco products,
and that appeal to adult tobacco consumers;
- significant changes in price, availability or quality of
tobacco, other raw materials or component parts, including as a
result of the COVID-19 pandemic;
- the risks related to the reliance by our tobacco subsidiaries
on a few significant facilities and a small number of key
suppliers, distributors and distribution chain service providers,
and the risk of an extended disruption at a facility of, or of
service by, a supplier, distributor or distribution chain service
provider of our tobacco subsidiaries or investees, including as a
result of the COVID-19 pandemic;
- 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;
- our inability to attract and retain the best talent due to the
impact of decreasing social acceptance of tobacco usage, tobacco
control actions and other factors;
- impairment losses as a result of the write down of intangible
assets, including goodwill;
- the adverse effect of acquisitions, investments, dispositions
or other events on our credit rating;
- our inability to acquire attractive businesses or make
attractive investments on favorable terms, or at all, or to realize
the anticipated benefits from an acquisition or investment and our
inability to dispose of businesses or investments on favorable
terms or at all;
- the risks related to disruption and uncertainty in the credit
and capital markets, including risk of access to these markets both
generally and at current prevailing rates, which may adversely
affect our earnings or dividend rate or both;
- our inability to attract and retain investors due to the impact
of decreasing social acceptance of tobacco usage or unfavorable ESG
ratings;
- the risk that any challenge to our investment in JUUL, if
successful, could result in a broad range of resolutions including
divestiture of the investment or rescission of the
transaction;
- the risks generally related to our investments in JUUL and
Cronos, including our inability to realize the expected benefits of
our investments in the expected time frames, or at all, due to the
risks encountered by our investees in their businesses, such as
operational, competitive, compliance, legislative 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 investment in Cronos and changes in the fair
value of our investment in JUUL;
- the risks related to our inability to acquire a controlling
interest in JUUL as a result of standstill restrictions or to
control the material decisions of JUUL, restrictions on our ability
to sell or otherwise transfer our shares of JUUL until December 20,
2024, and non-competition restrictions for the same time period
subject to certain exceptions;
- the adverse effects of risks encountered by ABI in its
business, including effects of the COVID-19 pandemic, foreign
currency exchange rates and the impact of movements in ABI’s stock
price on our investment in ABI, including on our reported earnings
from and carrying value of our investment in ABI, which could
result in additional impairments of our investment, and the
dividends paid by ABI on the shares we own;
- the risks related to our ownership percentage in ABI decreasing
below certain levels, including 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; and
- the risks, including criminal, civil or tax liability for
Altria, related to Altria’s or 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 September
30,
(dollars in millions, except per
share data)
(Unaudited)
2021
2020
% Change
Net revenues
$
6,786
$
7,123
(4.7)%
Cost of sales 1
1,858
1,961
Excise taxes on products 1
1,255
1,445
Gross profit
3,673
3,717
(1.2)%
Marketing, administration and research
costs
569
480
Operating companies income
3,104
3,237
(4.1)%
Amortization of intangibles
18
17
General corporate expenses
135
60
Operating income
2,951
3,160
(6.6)%
Interest and other debt expense, net
266
310
Net periodic benefit income, excluding
service cost
(63)
(3)
(Income) losses from equity investments
1
5,915
472
Impairment of JUUL equity securities
—
2,600
(Gain) loss on Cronos-related financial
instruments
135
105
Earnings (losses) before income taxes
(3,302)
(324)
Provision (benefit) for income taxes
(582)
632
Net earnings (losses)
(2,720)
(956)
(100)%+
Net (earnings) losses attributable to
noncontrolling interests
(2)
4
Net earnings (losses) attributable to
Altria
$
(2,722)
$
(952)
(100)%+
Per share data:
Diluted earnings (losses) per share
attributable to Altria
$
(1.48)
$
(0.51)
(100)%+
Weighted-average diluted shares
outstanding
1,842
1,859
(0.9)%
1 Cost of sales includes charges for resolution expenses related
to state settlement agreements and FDA user fees. Supplemental
information concerning those items, excise taxes on products sold
and (income) losses from equity investments is shown in Schedule
5.
Schedule 2
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data
For the Quarters Ended September
30,
(dollars in millions)
(Unaudited)
Net Revenues
Smokeable Products
Oral Tobacco Products
Wine
All Other
Total
2021
$
5,975
$
626
$
177
$
8
$
6,786
2020
6,313
640
157
13
7,123
% Change
(5.4)
%
(2.2)
%
12.7
%
(38.5)
%
(4.7)
%
Reconciliation:
For the quarter ended September 30,
2020
$
6,313
$
640
$
157
$
13
$
7,123
Operations
(338)
(14)
20
(5)
(337)
For the quarter ended September 30,
2021
$
5,975
$
626
$
177
$
8
$
6,786
Operating Companies Income
(Loss)
Smokeable Products
Oral Tobacco Products
Wine
All Other
Total
2021
$
2,753
$
405
$
(24)
$
(30)
$
3,104
2020
2,789
436
19
(7)
3,237
% Change
(1.3)
%
(7.1)
%
(100)%+
(100)%+
(4.1)
%
Reconciliation:
For the quarter ended September 30,
2020
$
2,789
$
436
$
19
$
(7)
$
3,237
Implementation and acquisition-related
costs - 2020
—
4
1
—
5
Tobacco and health and certain other
litigation items - 2020
34
—
—
—
34
34
4
1
—
39
NPM Adjustment Items - 2021
21
—
—
—
21
Implementation and disposition-related
costs - 2021
—
—
(51)
—
(51)
Tobacco and health and certain other
litigation items - 2021
(29)
—
—
—
(29)
(8)
—
(51)
—
(59)
Operations
(62)
(35)
7
(23)
(113)
For the quarter ended September 30,
2021
$
2,753
$
405
$
(24)
$
(30)
$
3,104
Schedule 3
ALTRIA GROUP, INC.
and Subsidiaries
Consolidated Statements of
Earnings (Losses)
For the Nine Months Ended
September 30,
(dollars in millions, except per
share data)
(Unaudited)
2021
2020
% Change
Net revenues
$
19,758
$
19,849
(0.5)
%
Cost of sales 1
5,348
5,909
Excise taxes on products 1
3,733
4,063
Gross profit
10,677
9,877
8.1
%
Marketing, administration and research
costs
1,542
1,381
Operating companies income
9,135
8,496
7.5
%
Amortization of intangibles
53
54
General corporate expenses
255
150
Operating income
8,827
8,292
6.5
%
Interest and other debt expense, net
869
893
Loss on early extinguishment of debt
649
—
Net periodic benefit income, excluding
service cost
(152)
(58)
(Income) losses from equity investments
1
5,789
306
Impairment of JUUL equity securities
—
2,600
(Gain) loss on Cronos-related financial
instruments
128
202
Earnings (losses) before income taxes
1,544
4,349
(64.5)
%
Provision (benefit) for income taxes
693
1,817
Net earnings (losses)
851
2,532
(66.4)
%
Net (earnings) losses attributable to
noncontrolling interests
—
11
Net earnings (losses) attributable to
Altria
$
851
$
2,543
(66.5)
%
Per share data2:
Diluted earnings (losses) per share
attributable to Altria
$
0.46
$
1.36
(66.2)
%
Weighted-average diluted shares
outstanding
1,849
1,859
(0.5)
%
1 Cost of sales includes charges for resolution expenses related
to state settlement agreements and FDA user fees. Supplemental
information concerning those items, excise taxes on products sold
and income (losses) from equity investments is shown in Schedule
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 Nine Months Ended
September 30,
(dollars in millions)
(Unaudited)
Net Revenues
Smokeable Products
Oral Tobacco Products
Wine
All Other
Total
2021
$
17,275
$
1,945
$
494
$
44
$
19,758
2020
17,522
1,901
434
(8)
19,849
% Change
(1.4)
%
2.3
%
13.8
%
100.0%+
(0.5)
%
Reconciliation:
For the nine months ended September 30,
2020
$
17,522
$
1,901
$
434
$
(8)
$
19,849
Operations
(247)
44
60
52
(91)
For the nine months ended September 30,
2021
$
17,275
$
1,945
$
494
$
44
$
19,758
Operating Companies Income
(Loss)
Smokeable Products
Oral Tobacco Products
Wine
All Other
Total
2021
$
7,901
$
1,269
$
21
$
(56)
$
9,135
2020
7,609
1,297
(347)
(63)
8,496
% Change
3.8
%
(2.2)
%
100.0%+
11.1
%
7.5
%
Reconciliation:
For the nine months ended September 30,
2020
$
7,609
$
1,297
$
(347)
$
(63)
$
8,496
Implementation and acquisition-related
costs - 2020
—
6
395
—
401
Tobacco and health and certain other
litigation items -
2020
73
—
—
—
73
COVID-19 special items - 2020
41
9
—
—
50
114
15
395
—
524
NPM Adjustment Items - 2021
53
—
—
—
53
Implementation, acquisition and
disposition-related costs - 2021
—
(37)
(52)
—
(89)
Tobacco and health and certain other
litigation items -
2021
(72)
—
—
—
(72)
(19)
(37)
(52)
—
(108)
Operations
197
(6)
25
7
223
For the nine months ended September 30,
2021
$
7,901
$
1,269
$
21
$
(56)
$
9,135
Schedule 5
ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data
(dollars in millions)
(Unaudited)
For the Quarters Ended
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
The segment detail of excise taxes on
products sold is as follows:
Smokeable products
$
1,218
$
1,407
$
3,620
$
3,950
Oral tobacco products
32
33
98
98
Wine
5
5
14
14
All other
—
—
1
1
$
1,255
$
1,445
$
3,733
$
4,063
The segment detail of charges for
resolution expenses related to state
settlement agreements included in cost
of sales is as follows:
Smokeable products
$
1,116
$
1,206
$
3,183
$
3,329
Oral tobacco products
2
2
7
7
All other
—
—
1
—
$
1,118
$
1,208
$
3,191
$
3,336
The segment detail of FDA user fees
included in cost of sales is
as follows:
Smokeable products
$
69
$
70
$
206
$
210
Oral tobacco products
1
2
3
4
$
70
$
72
$
209
$
214
The detail of (income) losses from
equity investments is as follows:
ABI
$
6,036
$
418
$
5,644
$
306
Cronos
(21)
54
145
—
JUUL
(100)
—
—
—
$
5,915
$
472
$
5,789
$
306
Schedule 6
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings (Losses) and Diluted
(Losses) Earnings Per Share - Attributable to Altria Group,
Inc.
For the Quarters Ended September
30,
(dollars in millions, except per
share data)
(Unaudited)
Net Earnings (Losses)
Diluted EPS
2021 Net Earnings (Losses)
$
(2,722)
$
(1.48)
2020 Net Earnings (Losses)
$
(952)
$
(0.51)
% Change
(100)%+
(100)%+
Reconciliation:
2020 Net Earnings (Losses)
$
(952)
$
(0.51)
2020 Implementation and
acquisition-related costs
8
—
2020 Tobacco and health and certain other
litigation items
25
0.01
2020 Impairment of JUUL equity
securities
2,600
1.40
2020 ABI-related special items
405
0.22
2020 Cronos-related special items
142
0.08
2020 Tax items
(13)
(0.01)
Subtotal 2020 special items
3,167
1.70
2021 NPM Adjustment Items
33
0.02
2021 Implementation, acquisition and
disposition-related costs
(52)
(0.03)
2021 Tobacco and health and certain other
litigation items
(80)
(0.04)
2021 JUUL changes in fair value
100
0.05
2021 ABI-related special items
(4,899)
(2.65)
2021 Cronos-related special items
(89)
(0.05)
2021 Tax items
8
—
Subtotal 2021 special items
(4,979)
(2.70)
Fewer shares outstanding
—
0.01
Change in tax rate
26
0.01
Operations
16
0.01
2021 Net Earnings (Losses)
$
(2,722)
$
(1.48)
Schedule 7
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and
non-GAAP Measures
For the Quarters Ended September
30,
(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
2021 Reported
$
(3,302)
$
(582)
$
(2,720)
$
(2,722)
$
(1.48)
NPM Adjustment Items
(44)
(11)
(33)
(33)
(0.02)
Implementation, acquisition and
disposition-related costs
61
9
52
52
0.03
Tobacco and health and certain other
litigation items
105
25
80
80
0.04
JUUL changes in fair value
(100)
—
(100)
(100)
(0.05)
ABI-related special items
6,200
1,301
4,899
4,899
2.65
Cronos-related special items
89
—
89
89
0.05
Tax items
—
8
(8)
(8)
—
2021 Adjusted for Special Items
$
3,009
$
750
$
2,259
$
2,257
$
1.22
2020 Reported
$
(324)
$
632
$
(956)
$
(952)
$
(0.51)
Implementation and acquisition-related
costs
12
4
8
8
—
Tobacco and health and certain other
litigation items
34
9
25
25
0.01
Impairment of JUUL equity securities
2,600
—
2,600
2,600
1.40
ABI-related special items
513
108
405
405
0.22
Cronos-related special items
143
1
142
142
0.08
Tax items
—
13
(13)
(13)
(0.01)
2020 Adjusted for Special Items
$
2,978
$
767
$
2,211
$
2,215
$
1.19
2021 Reported Net Earnings
(Losses)
$
(2,722)
$
(1.48)
2020 Reported Net Earnings
(Losses)
$
(952)
$
(0.51)
% Change
(100)%+
(100)%+
2021 Net Earnings Adjusted for Special
Items
$
2,257
$
1.22
2020 Net Earnings Adjusted for Special
Items
$
2,215
$
1.19
% Change
1.9
%
2.5
%
Schedule 8
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings (Losses) and Diluted
Earnings Per Share - Attributable to Altria Group, Inc.
For the Nine Months Ended
September 30,
(dollars in millions, except per
share data)
(Unaudited)
Net Earnings (Losses)
Diluted EPS1
2021 Net Earnings (Losses)
$
851
$
0.46
2020 Net Earnings (Losses)
$
2,543
$
1.36
% Change
(66.5)
%
(66.2)
%
Reconciliation:
2020 Net Earnings (Losses)
$
2,543
$
1.36
2020 Implementation and
acquisition-related costs
314
0.17
2020 Tobacco and health and certain other
litigation items
57
0.03
2020 Impairment of JUUL equity
securities
2,600
1.40
2020 ABI-related special items
544
0.29
2020 Cronos-related special items
143
0.08
2020 COVID-19 special items
37
0.02
2020 Tax items
38
0.02
Subtotal 2020 special items
3,733
2.01
2021 NPM Adjustment Items
57
0.03
2021 Implementation, acquisition and
disposition-related costs
(95)
(0.05)
2021 Tobacco and health and certain other
litigation items
(113)
(0.06)
2021 ABI-related special items
(4,828)
(2.60)
2021 Cronos-related special items
(205)
(0.11)
2021 Loss on early extinguishment of
debt
(496)
(0.27)
2021 Tax items
5
—
Subtotal 2021 special items
(5,675)
(3.06)
Fewer shares outstanding
—
0.02
Change in tax rate
(18)
(0.01)
Operations
268
0.14
2021 Net Earnings (Losses)
$
851
$
0.46
1 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 9
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and
non-GAAP Measures
For the Nine Months Ended
September 30,
(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
2021 Reported
$
1,544
$
693
$
851
$
851
$
0.46
NPM Adjustment Items
(76)
(19)
(57)
(57)
(0.03)
Implementation, acquisition and
disposition-related costs
117
22
95
95
0.05
Tobacco and health and certain other
litigation items
148
35
113
113
0.06
ABI-related special items
6,111
1,283
4,828
4,828
2.60
Cronos-related special items
200
(5)
205
205
0.11
Loss on early extinguishment of debt
649
153
496
496
0.27
Tax items
—
5
(5)
(5)
—
2021 Adjusted for Special Items
$
8,693
$
2,167
$
6,526
$
6,526
$
3.52
2020 Reported
$
4,349
$
1,817
$
2,532
$
2,543
$
1.36
Implementation and acquisition-related
costs
415
101
314
314
0.17
Tobacco and health and certain other
litigation items
76
19
57
57
0.03
Impairment of JUUL equity securities
2,600
—
2,600
2,600
1.40
ABI-related special items
689
145
544
544
0.29
Cronos-related special items
144
1
143
143
0.08
COVID-19 special items
50
13
37
37
0.02
Tax items
—
(38)
38
38
0.02
2020 Adjusted for Special Items
$
8,323
$
2,058
$
6,265
$
6,276
$
3.37
2021 Reported Net Earnings
(Losses)
$
851
$
0.46
2020 Reported Net Earnings
(Losses)
$
2,543
$
1.36
% Change
(66.5)
%
(66.2)
%
2021 Net Earnings Adjusted for Special
Items
$
6,526
$
3.52
2020 Net Earnings Adjusted for Special
Items
$
6,276
$
3.37
% Change
4.0
%
4.5
%
1 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 10
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and
non-GAAP Measures
For the Year Ended December 31,
2020
(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
2020 Reported
$
6,890
$
2,436
$
4,454
$
4,467
$
2.40
NPM Adjustment Items
4
1
3
3
—
Asset impairment, exit, implementation
and
acquisition-related costs
431
89
342
342
0.18
Tobacco and health and certain other
litigation items
83
21
62
62
0.03
Impairment in JUUL equity securities
2,600
—
2,600
2,600
1.40
JUUL changes in fair value
(100)
—
(100)
(100)
(0.05)
ABI-related special items
763
160
603
603
0.32
Cronos-related special items
51
(2)
53
53
0.03
COVID-19 special items
50
13
37
37
0.02
Tax items
—
(50)
50
50
0.03
2020 Adjusted for Special Items
$
10,772
$
2,668
$
8,104
$
8,117
$
4.36
Schedule 11
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Consolidated Balance
Sheets
(dollars in millions)
(Unaudited)
September 30, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
2,957
$
4,945
Inventories
1,133
1,966
Assets held for sale
1,490
—
Other current assets
440
206
Property, plant and equipment, net
1,518
2,012
Goodwill and other intangible assets,
net
17,503
17,792
Investments in equity securities
13,874
19,529
Other long-term assets
649
964
Total assets
$
39,564
$
47,414
Liabilities and
Stockholders’ (Deficit) Equity
Current portion of long-term debt
$
1,105
$
1,500
Accrued settlement charges
2,996
3,564
Liabilities held for sale
295
—
Other current liabilities
3,716
3,999
Long-term debt
27,022
27,971
Deferred income taxes
3,557
4,532
Accrued pension costs
280
551
Accrued postretirement health care
costs
1,512
1,951
Other long-term liabilities
307
381
Total liabilities
40,790
44,449
Redeemable noncontrolling interest
39
40
Total stockholders’ (deficit) equity
(1,265)
2,925
Total liabilities and stockholders’
(deficit) equity
$
39,564
$
47,414
Total debt
$
28,127
$
29,471
Schedule 12
ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data for
Special Items
For the Quarters Ended September
30,
(dollars in millions)
(Unaudited)
Cost of
Sales
Marketing,
administration
and research costs
General
corporate
expenses
Interest and other debt
expense, net
(Income) losses from equity
investments
Impairment of JUUL equity
securities
(Gain) loss on Cronos-related
financial instruments
2021 Special Items - (Income)
Expense
NPM Adjustment Items
$
(21)
$
—
$
—
$
(23)
$
—
$
—
$
—
Implementation, acquisition and
disposition-related costs
—
51
10
—
—
—
—
Tobacco and health and certain other
litigation items
—
29
70
6
—
—
—
JUUL changes in fair value
—
—
—
—
(100)
—
—
ABI-related special items
—
—
—
—
6,200
—
Cronos-related special items
—
—
—
—
(46)
—
135
2020 Special Items - (Income)
Expense
Implementation and acquisition-related
costs
$
1
$
4
$
7
$
—
$
—
$
—
$
—
Tobacco and health and certain other
litigation items
—
34
—
—
—
—
—
Impairment of JUUL equity securities
—
—
—
—
—
2,600
—
ABI-related special items
—
—
—
—
513
—
—
Cronos-related special items
—
—
—
—
38
—
105
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 Nine Months Ended
September 30,
(dollars in millions)
(Unaudited)
Cost of
Sales
Marketing, administration and
research costs
General corporate
expenses
Interest and other debt
expense, net
Loss on early extinguishment
of debt
(Income) losses from equity
investments
Impairment of JUUL equity
securities
(Gain) loss on Cronos-related
financial instruments
2021 Special Items - (Income)
Expense
NPM Adjustment Items
$
(53)
$
—
$
—
$
(23)
$
—
$
—
$
—
$
—
Implementation, acquisition and
disposition-related costs
1
88
28
—
—
—
—
—
Tobacco and health and certain other
litigation items
—
72
70
6
—
—
—
—
JUUL changes in fair value
—
—
—
—
—
—
—
—
ABI-related special items
—
—
—
—
—
6,111
—
—
Cronos-related special items
—
—
—
—
—
72
—
128
Loss on early extinguishment of debt
—
—
—
—
649
—
—
—
2020 Special Items - (Income)
Expense
Implementation and acquisition-related
costs
$
395
$
6
$
14
$
—
$
—
$
—
$
—
$
—
Tobacco and health and certain other
litigation items
—
73
—
3
—
—
—
—
Impairment of JUUL equity securities
—
—
—
—
—
2,600
—
ABI-related special items
—
—
—
—
—
689
—
—
Cronos-related special items
—
—
—
—
—
(58)
—
202
COVID-19 special items
50
—
—
—
—
—
—
—
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.
View source
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