Altria Group, Inc. (NYSE: MO) today reports our 2023
first-quarter business results and reaffirms our guidance for 2023
full-year adjusted diluted earnings per share (EPS).
“We are off to a strong start and believe our businesses are on
track to deliver against full-year plans,” said Billy Gifford,
Altria’s Chief Executive Officer. “Our tobacco businesses performed
well in a challenging macroeconomic environment. We delivered
strong adjusted diluted EPS growth of 5.4%, and we announced
exciting progress toward our Vision.”
“We reaffirm our guidance to deliver 2023 full-year adjusted
diluted EPS in a range of $4.98 to $5.13. This range represents an
adjusted diluted EPS growth rate of 3% to 6% from a $4.84 base in
2022.”
Altria Headline Financials1
($ in millions, except per share data)
Q1 2023
Change vs. Q1
2022
Net revenues
$5,719
(2.9)%
Revenues net of excise taxes
$4,763
(1.2)%
Reported tax rate
27.9%
1.2 pp
Adjusted tax rate
25.0%
(0.1) pp
Reported diluted EPS2
$1.00
(7.4)%
Adjusted diluted EPS2
$1.18
5.4%
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 per share.
As previously announced, a conference call with the investment
community and news media will be webcast on April 27, 2023 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
Cash Returns to Shareholders
- Due to the timing of our announcement of the NJOY Holdings,
Inc. (NJOY) transaction, we did not repurchase any shares in the
first quarter. As of March 31, 2023, we had $1 billion remaining
under the current share repurchase program, which we expect to
complete by December 31, 2023. Share repurchases depend on
marketplace conditions and other factors, and the program remains
subject to the discretion of our Board of Directors (Board).
- We paid dividends of $1.7 billion in the first quarter.
Capital Markets Activity
- We retired approximately $1.3 billion of outstanding debt at
maturity in February 2023.
Macroeconomic and Geopolitical Conditions Impacting Our
Businesses
Impact on Tobacco Business Operations
- Our businesses were not materially impacted by increased costs
resulting from high inflation.
Impact on Adult Tobacco Consumers (ATCs)
- We believe the cumulative effect of high inflation over the
past several quarters impacted ATC behaviors, discretionary income
and spending. As a result, PM USA and the cigarette industry
experienced elevated volume declines, and we observed accelerated
share growth in the discount cigarettes segment. Despite these
factors, our leading tobacco brands remained resilient and we
continued to observe significant brand loyalty in the tobacco space
overall.
NJOY Transaction
- As previously disclosed, we entered into a definitive agreement
to acquire NJOY for approximately $2.75 billion in cash payable at
closing and up to an additional $500 million in cash payments that
are contingent upon regulatory outcomes with respect to certain
NJOY products (NJOY Transaction).
- The completion of the NJOY Transaction is subject to customary
conditions, including clearance from the U.S. Federal Trade
Commission (FTC) under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (HSR Act). The NJOY Transaction remains
under FTC review, and the current waiting period under the HSR Act
expires in May 2023.
JUUL Transaction
As previously disclosed, we have exchanged our entire minority
economic interest in JUUL Labs, Inc. (JUUL) for a non-exclusive,
irrevocable global license to certain of JUUL’s heated tobacco
intellectual property (2023 JUUL Transaction). As a result of the
2023 JUUL Transaction, we recorded a non-cash, pre-tax loss of $250
million on the disposition of our JUUL equity securities for the
three months ended March 31, 2023. Additionally, we considered
specific facts and circumstances around the nature of intellectual
property we received as part of the 2023 JUUL Transaction and
determined that the fair value of the intellectual property was not
material to our financial statements. As a result, we did not
record an asset associated with this intellectual property on our
condensed consolidated balance sheet at March 31, 2023. The primary
drivers of this conclusion were (i) our rights to the intellectual
property being non-exclusive, (ii) there being no product or
technology transferred to us associated with the intellectual
property and (iii) there being no connection between the
intellectual property and our current product development
plans.
2028 Enterprise Goals
At our 2023 Investor Day, we announced our 2028 Enterprise
Goals. These goals assume the successful completion of the NJOY
Transaction and are listed below:
Corporate
- Deliver mid-single digits adjusted diluted EPS growth on a
compounded annual basis through 2028.
- A new progressive dividend goal targeting mid-single digits
dividend growth annually through 2028.
- Maintain a debt-to-earnings before interest, taxes,
depreciation and amortization (consolidated EBITDA, as defined in
our senior unsecured revolving credit agreement) ratio of
approximately 2.0x.
- Maintain our leadership position in the U.S. tobacco
space.
- Maintain a total adjusted OCI margin of at least 60% in each of
the next five years.
U.S. Smoke-Free
Portfolio
- Grow U.S. smoke-free volumes by at least 35% from our 2022 base
of 800 million units.
- Approximately double our smoke-free net revenues to $5 billion
from our 2022 base of $2.6 billion, with $2 billion coming from
innovative smoke-free products.
Long-Term Growth
- Our aspiration is to compete in the international innovative
smoke-free and non-nicotine categories. We are evaluating these
opportunities and expect to finalize strategies for these growth
areas over the next 12 months.
Additional details on these goals can be found in the Investors
section of www.altria.com.
Environmental, Social and Governance (ESG)
Our Corporate Responsibility Focus Areas are: (i) reduce the
harm of tobacco products, (ii) prevent underage use, (iii) protect
the environment, (iv) drive responsibility through our value chain,
(v) support our people and communities and (vi) engage and lead
responsibly. Our corporate responsibility reports are available on
the Corporate Responsibility section of www.altria.com.
- Our responsibility efforts and recognitions from the first
quarter include the following:
- We signed a Virtual Power Purchase Agreement in 2022 for
renewable energy produced by a wind farm in Texas that became
operational in January 2023. We currently expect to achieve our
targets - 100% renewable electricity and 55% reduction in
operational greenhouse gas emissions by 2030 - ahead of
schedule.
- We were recognized as a member of CDP’s 2022 Supplier
Engagement Leaderboard for climate change. Our Supplier Engagement
Rating (SER) positions us in the top 8% of companies that completed
CDP's full climate questionnaire. The SER provides a rating for how
effectively companies are engaging their suppliers on climate
change.
- We published our 2022 Lobbying and Political Activity
Transparency & Integrity Annual Report, which examines our
public policy activities - including lobbying at the federal, state
and local levels, grassroots (indirect) lobbying activities, and
support of public policy organizations, candidates and political
committees - as well as our extensive compliance program that
governs these activities.
2023 Full-Year Guidance
We reaffirm our guidance to deliver 2023 full-year adjusted
diluted EPS in a range of $4.98 to $5.13, representing a growth
rate of 3% to 6% from an adjusted diluted EPS base of $4.84 in
2022. While the 2023 full-year adjusted diluted EPS guidance
accounts for a range of scenarios, the external environment remains
dynamic. We will continue to monitor conditions related to (i) the
economy, including the impact of high inflation, rising interest
rates and global supply chain disruptions, (ii) ATC dynamics,
including disposable income, purchasing patterns and adoption of
smoke-free products, and (iii) regulatory and legislative
developments.
Our 2023 full-year adjusted diluted EPS guidance range includes
planned investments in support of our Vision, such as (i) continued
smoke-free product research, development and regulatory preparation
expenses, (ii) enhancement of our digital consumer engagement
system and (iii) marketplace activities in support of our
smoke-free products. The guidance range also includes lower
expected net periodic benefit income due to market factors,
including higher interest rates, and the impact of the 2022
completion of the wind-down of our former financial services
business. This guidance range does not include the potential
financial impacts of the NJOY Transaction.
Our full-year adjusted diluted EPS guidance range excludes the
impact of certain income and expense items that our 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 items, equity
investment-related special items (including any changes in fair
value of our equity investment recorded at fair value and any
changes in the fair value of related warrants and preemptive
rights), certain income tax items, charges associated with tobacco
and health and certain other litigation items, and resolutions of
certain non-participating manufacturer (NPM) adjustment disputes
under the MSA (such dispute resolutions are referred to as NPM
Adjustment Items). See Table 1 below for the income and expense
items for the first quarter of 2023.
Our management cannot estimate on a forward-looking basis the
impact of certain income and expense items, including those items
noted in the preceding paragraph, on our reported diluted EPS
because these items, which could be significant, may be unusual or
infrequent, are difficult to predict and may be highly variable. As
a result, we do not provide a corresponding U.S. generally accepted
accounting principles (GAAP) measure for, or reconciliation to, our
adjusted diluted EPS guidance.
ALTRIA GROUP, INC.
See “Basis of Presentation” below for an explanation of
financial measures and reporting segments discussed in this
release.
Financial Performance
- Net revenues decreased 2.9% to $5.7 billion, primarily driven
by lower net revenues in the smokeable products segment. Revenues
net of excise taxes decreased 1.2% to $4.8 billion.
- Reported diluted EPS decreased 7.4% to $1.00, primarily driven
by loss on the disposition of our JUUL equity securities, higher
tobacco and health and certain other litigation items, partially
offset by 2022 changes in the estimated fair value of our former
investment in JUUL equity securities, favorable interest expense
and fewer shares outstanding.
- Adjusted diluted EPS increased 5.4% to $1.18, primarily driven
by fewer shares outstanding, higher adjusted earnings from our
investment in ABI and favorable interest expense.
Table 1 - Altria’s Adjusted
Results
First Quarter
2023
2022
Change
Reported diluted EPS
$
1.00
$
1.08
(7.4
)%
NPM Adjustment Items
—
(0.02
)
Tobacco and health and certain other
litigation items
0.04
—
Loss on disposition and changes in fair
value of JUUL equity securities
0.14
0.05
ABI-related special items
(0.01
)
(0.02
)
Cronos-related special items
0.01
0.03
Adjusted diluted EPS
$
1.18
$
1.12
5.4
%
Note: For details of pre-tax, tax and after-tax amounts, see
Schedule 5.
Special Items
The EPS impact of the following special items is shown in Table
1 and Schedules 4 and 5.
NPM Adjustment Items
- In the first quarter of 2022, we recorded pre-tax income of $60
million (or $0.02 per share) due to NPM Adjustments items.
Tobacco and Health and Certain Other Litigation Items
- In the first quarter of 2023, we recorded pre-tax charges of
$111 million (or $0.04 per share), for tobacco and health and
certain other litigation items and related interest costs.
Loss on Disposition and Changes in Fair Value of JUUL Equity
Securities
We recorded non-cash, pre-tax losses from investments in equity
securities as a result of the 2023 JUUL Transaction and changes in
the estimated fair value of our former investment in JUUL in 2022.
Amounts consisted of the following:
First Quarter
($ in millions, except per share
data)
2023
2022
(Income) losses from investments in equity
securities
$
250
$
100
Losses per share
$
0.14
$
0.05
We recorded corresponding adjustments to the JUUL tax valuation
allowance in 2023 and 2022.
ABI-Related Special Items
- In the first quarter of 2022, equity earnings from ABI included
net pre-tax income of $59 million (or $0.02 per share), primarily
related to ABI’s mark-to-market gains on certain ABI financial
instruments associated with its share commitments.
The ABI-related special items above include our respective share
of the amounts recorded by ABI and additional adjustments related
to (i) conversion from international financial reporting standards
to GAAP and (ii) adjustments to our investment required under the
equity method of accounting.
Cronos-Related Special Items
We recorded net pre-tax expense consisting of the following:
First Quarter
($ in millions, except per share
data)
2023
2022
Loss on Cronos-related financial
instruments
$
—
$
10
(Income) losses from investments in equity
securities 1
26
51
Total Cronos-related special items -
(income) expense
$
26
$
61
Losses per share
$
0.01
$
0.03
1 Amounts include our share of special items recorded by Cronos
and additional adjustments, if required under the equity method of
accounting, related to our investment in Cronos.
We recorded corresponding adjustments to the Cronos tax
valuation allowance in 2023 and 2022 relating to the special
items.
SMOKEABLE PRODUCTS
Revenues and OCI
- Net revenues decreased 3.3%, primarily driven by lower shipment
volume and higher promotional investments, partially offset by
higher pricing. Revenues net of excise taxes decreased 1.4%.
- Reported operating companies income (OCI) decreased 2.2%,
primarily driven by lower shipment volume, higher per unit
settlement charges, 2022 NPM Adjustment Items and higher
promotional investments, partially offset by higher pricing.
- Adjusted OCI was essentially unchanged, as higher pricing was
mostly offset by lower shipment volume, higher per unit settlement
changes and higher promotional investments. Adjusted OCI margins
increased by 0.9 percentage points to 60.4%.
Table 2 - Smokeable Products: Revenues
and OCI ($ in millions)
First Quarter
2023
2022
Change
Net revenues
$
5,090
$
5,265
(3.3
)%
Excise taxes
(928
)
(1,044
)
Revenues net of excise taxes
$
4,162
$
4,221
(1.4
)%
Reported OCI
$
2,503
$
2,559
(2.2
)%
NPM Adjustment Items
—
(60
)
Tobacco and health and certain other
litigation items
12
12
Adjusted OCI
$
2,515
$
2,511
0.2
%
Reported OCI margins 1
60.1
%
60.6
%
(0.5
) pp
Adjusted OCI margins 1
60.4
%
59.5
%
0.9
pp
1 Reported and adjusted OCI margins are calculated as reported
and adjusted OCI, respectively, divided by revenues net of excise
taxes.
Shipment Volume
- Smokeable products segment reported domestic cigarette shipment
volume decreased 11.4%, primarily driven by the industry’s decline
rate, retail share losses (both of which were impacted by
macroeconomic pressures on ATC disposable income) and trade
inventory movements, partially offset by calendar differences.
- When adjusted for trade inventory movements and calendar
differences, smokeable products segment domestic cigarette shipment
volume decreased by an estimated 11%.
- When adjusted for calendar differences, trade inventory
movements and other factors, total estimated domestic cigarette
industry volume decreased by an estimated 9%.
- Reported cigar shipment volume increased 2.3%.
Table 3 - Smokeable Products: Reported
Shipment Volume (sticks in millions)
First Quarter
2023
2022
Change
Cigarettes:
Marlboro
16,396
18,290
(10.4
)%
Other premium
825
937
(12.0
)%
Discount
1,048
1,390
(24.6
)%
Total cigarettes
18,269
20,617
(11.4
)%
Cigars:
Black & Mild
443
433
2.3
%
Other
1
1
—
%
Total cigars
444
434
2.3
%
Total smokeable products
18,713
21,051
(11.1
)%
Note: Cigarettes volume includes units sold as well as
promotional units but excludes units sold for distribution to
Puerto Rico, U.S. Territories to overseas military and by Philip
Morris Duty Free Inc., none of which, individually or in the
aggregate, is material to our smokeable products segment.
Retail Share and Brand Activity
First Quarter
- Marlboro retail share of the total cigarette category was
42.0%, a decrease of 0.6 share points versus the prior year and 0.2
share points sequentially, primarily due to increased macroeconomic
pressures on ATC disposable income and increased competitive
activity. However, Marlboro share of the premium segment was 58.5%,
an increase of 0.7 share points versus the prior year and 0.1 share
point sequentially.
- The cigarette industry discount retail share was 28.2%, an
increase of 1.8 share points versus the prior year and 0.5 share
points sequentially primarily due to the ATC factors mentioned
above.
Table 4 - Smokeable Products:
Cigarettes Retail Share (percent)
First Quarter
2023
2022
Percentage point
change
Cigarettes:
Marlboro
42.0
%
42.6
%
(0.6
)
Other premium
2.3
2.3
—
Discount
2.7
3.2
(0.5
)
Total cigarettes
47.0
%
48.1
%
(1.1
)
Note: Retail share results for cigarettes are based on data from
Circana, Inc. and Circana Group, L.P. (“Circana”), formerly IRI, as
well as, MSAi. Circana is a newly formed company reflecting the
recent merger of IRI and NPD Group, Inc. Circana maintains a
blended retail service that uses a sample of stores and certain
wholesale shipments to project market share and depict share
trends. Similar to prior reporting, 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 through the Store Tracking Analytical Reporting System
(“STARS”), as provided by MSA. This service is not designed to
capture sales through other channels, including the internet,
direct mail and some illicitly tax-advantaged outlets. It is retail
services’ standard practice to periodically refresh their retail
scan services, which could restate retail share results that were
previously released in this service.
ORAL TOBACCO PRODUCTS
Revenues and OCI
- Net revenues increased 2.4%, primarily driven by higher
pricing, partially offset by a higher percentage of on! shipment
volume relative to MST versus the prior year (mix change), lower
shipment volume and higher promotional investments. Revenues net of
excise taxes increased 2.7%.
- Reported and adjusted OCI increased 2.2%, primarily driven by
higher pricing, partially offset by mix change, lower shipment
volume and higher promotional investments. Adjusted OCI margins
declined by 0.4 percentage points to 69.3%
Table 5 - Oral Tobacco Products:
Revenues and OCI ($ in millions)
First Quarter
2023
2022
Change
Net revenues
$
628
$
613
2.4%
Excise taxes
(28
)
(29
)
Revenues net of excise taxes
$
600
$
584
2.7%
Reported and adjusted OCI
$
416
$
407
2.2%
Reported and adjusted OCI margins
1
69.3
%
69.7
%
(0.4) pp
1 Reported and adjusted OCI margins are calculated as reported
and adjusted OCI, respectively, divided by revenues net of excise
taxes.
Shipment Volume
- Oral tobacco products segment reported domestic shipment volume
decreased 1.8%, primarily driven by retail share losses, trade
inventory movements and other factors, partially offset by calendar
differences and the industry’s growth rate. When adjusted for
calendar differences and trade inventory movements, oral tobacco
products segment shipment volume decreased by an estimated 3%.
- Total oral tobacco industry volume increased by an estimated 1%
for the six months ended March 31, 2023, primarily driven by growth
in oral nicotine pouches, partially offset by declines in MST
volumes.
Table 6 - Oral Tobacco Products:
Reported Shipment Volume (cans and packs in millions)
First Quarter
2023
2022
Change
Copenhagen
109.0
115.2
(5.4
)%
Skoal
40.3
43.9
(8.2
)%
on!
25.2
18.3
37.7
%
Other
16.1
16.7
(3.6
)%
Total oral tobacco products
190.6
194.1
(1.8
)%
Note: Volume includes cans and packs sold, as well as
promotional units, but excludes international volume, which is
currently not material to our oral tobacco products segment. New
types of oral tobacco products, as well as new packaging
configurations of existing oral tobacco products, may or may not be
equivalent to existing MST products on a can-for-can basis. To
calculate volumes of cans and packs shipped, one pack of snus or
one can of oral nicotine pouches, irrespective of the number of
pouches in the pack, is assumed to be equivalent to one can of
MST.
Retail Share and Brand Activity
- Oral tobacco products segment retail share was 45.2%, and
Copenhagen continued to be the leading oral tobacco brand with a
retail share of 25.4%. In the oral tobacco products segment, share
declines for MST products were primarily driven by the share growth
of oral nicotine pouches.
- Total U.S. oral tobacco category share for on! nicotine pouches
grew to 6.5%, an increase of 2.4 percentage points.
- The U.S. nicotine pouch category grew to 26.2% of the U.S. oral
tobacco category, an increase of 7.1 share points versus the prior
year. In addition, on! share of the nicotine pouch category grew to
24.6%, an increase of 3.3 share points versus the prior year.
Table 7 - Oral Tobacco Products: Retail
Share (percent)
First Quarter
2023
2022
Percentage
Point
Change
Copenhagen
25.4
28.0
(2.6
)
Skoal
10.3
11.7
(1.4
)
on!
6.5
4.1
2.4
Other
3.0
3.2
(0.2
)
Total oral tobacco products
45.2
%
47.0
%
(1.8
)
Note: Our oral tobacco products segment’s retail share results
exclude international volume. Retail share results for oral tobacco
products are based on data from Circana, 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
are defined by Circana 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 retail services’ standard practice to periodically
refresh their retail scan services, which could restate retail
share results that were previously released in this service.
Altria’s Profile
We have a leading portfolio of tobacco products for U.S. tobacco
consumers age 21+. Our Vision is to responsibly lead the transition
of adult smokers to a smoke-free future (Vision). We are Moving
Beyond Smoking™, leading the way in moving adult smokers away from
cigarettes by taking action to transition millions to potentially
less harmful choices - believing it is a substantial opportunity
for adult tobacco consumers, our businesses and society.
Our wholly owned subsidiaries include leading manufacturers of
both combustible and smoke-free products. In combustibles, we own
Philip Morris USA Inc. (PM USA), the most profitable U.S. cigarette
manufacturer, and John Middleton Co. (Middleton), a leading U.S.
cigar manufacturer. Our smoke-free portfolio includes ownership of
U.S. Smokeless Tobacco Company LLC (USSTC), the leading global
moist smokeless tobacco (MST) manufacturer, and Helix Innovations
LLC (Helix), a leading manufacturer of oral nicotine pouches.
Additionally, we have a majority-owned joint venture, Horizon
Innovations LLC (Horizon), for the U.S. marketing and
commercialization of heated tobacco stick products and, through a
separate agreement, we have the exclusive U.S. commercialization
rights to the IQOS Tobacco Heating System® and Marlboro HeatSticks®
through April 2024.
Our equity investments include Anheuser-Busch InBev SA/NV (ABI),
the world’s largest brewer, and Cronos Group Inc. (Cronos), a
leading Canadian cannabinoid company.
The brand portfolios of our tobacco operating companies include
Marlboro®, Black & Mild®, Copenhagen®, Skoal® and on!®.
Trademarks and service marks related to Altria referenced in this
release are the property of Altria or our subsidiaries or are used
with permission.
Learn more about Altria at www.altria.com and follow us on Twitter, Facebook
and LinkedIn.
Basis of Presentation
We report our financial results in accordance with GAAP. Our
management reviews OCI, which is defined as operating income before
general corporate expenses and amortization of intangibles, to
evaluate the performance of, and allocate resources to, our
segments. Our management also reviews certain financial results,
including OCI, OCI margins and diluted EPS, on an adjusted basis,
which excludes certain income and expense items, including those
items noted under “2023 Full-Year Guidance.” Our management does
not view any of these special items to be part of our underlying
results as they may be highly variable, may be unusual or
infrequent, are difficult to predict and can distort underlying
business trends and results. Our management also reviews income tax
rates on an adjusted basis. Our adjusted effective tax rate may
exclude certain income tax items from our reported effective tax
rate. Our management believes that adjusted financial measures
provide useful additional insight into underlying business trends
and results, and provide a more meaningful comparison of
year-over-year results. Our management uses adjusted financial
measures for planning, forecasting and evaluating business and
financial performance, including allocating resources and
evaluating results relative to employee compensation targets. These
adjusted financial measures are not required by, or calculated in
accordance with GAAP and may not be calculated the same as
similarly titled measures used by other companies. These adjusted
financial measures should thus be considered as supplemental in
nature and not considered in isolation or as a substitute for the
related financial information prepared in accordance with GAAP. We
provide reconciliations of historical adjusted financial measures
to corresponding GAAP measures in this release.
We use the equity method of accounting for our investment in ABI
and Cronos and report our share of ABI’s and Cronos’s results using
a one-quarter lag because ABI’s and Cronos’s results are not
available in time for us to record them in the concurrent period.
The one-quarter reporting lag for ABI and Cronos does not affect
our cash flows. We accounted for our former investment in the
equity securities of JUUL at fair value.
Our reportable segments are (i) smokeable products, including
combustible cigarettes and cigars manufactured and sold by PM USA
and Middleton, respectively, and (ii) oral tobacco products,
including MST and snus products manufactured and sold by USSTC, and
oral nicotine pouches sold by Helix. We have included results for
Helix rest-of-world, the IQOS Tobacco Heating System® and Philip
Morris Capital Corporation (prior to the completion of its
wind-down at the end of 2022) 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 are subject to 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 to differ
materially from those contained in the forward-looking statements
included in this release are described in our publicly filed
reports, including our Annual Report on Form 10-K for the year
ended December 31, 2022. These factors include the following:
- our inability to anticipate and respond to changes in adult
tobacco consumer preferences and purchase behavior;
- our inability to compete effectively;
- 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 shipment
volume;
- our failure to commercialize innovative products, including
tobacco products that may reduce health risks relative to other
tobacco products and appeal to adult tobacco consumers;
- changes, including in macroeconomic and geopolitical conditions
(including inflation), that result in shifts in adult tobacco
consumer disposable income and purchasing behavior, including
choosing lower-priced and discount brands or products;
- unfavorable outcomes with respect to litigation proceedings or
any governmental investigations;
- the risks associated with significant federal, state and local
government actions, including U.S. Food and Drug Administration
(FDA) regulatory actions, and various private sector actions;
- increases in tobacco product-related taxes;
- our failure to complete or manage successfully strategic
transactions, including the NJOY Transaction and other
acquisitions, dispositions, joint ventures and investments in third
parties or realize the anticipated benefits of such
transactions;
- significant changes in price, availability or quality of
tobacco, other raw materials or component parts, including as a
result of changes in macroeconomic, climate and geopolitical
conditions;
- our reliance on a few significant facilities and a small number
of key suppliers, distributors and distribution chain service
providers and the risks associated with an extended disruption at a
facility or in service by a supplier, distributor or distribution
chain service provider;
- the risk that we may be required to write down intangible
assets, including trademarks and goodwill, due to impairment;
- the risk that we could decide, or be required to, recall
products;
- the various risks related to health epidemics and pandemics,
such as the COVID-19 pandemic, and the measures that international,
federal, state and local governments, agencies, law enforcement and
health authorities implement to address them;
- our inability to attract and retain a highly skilled and
diverse workforce due to the decreasing social acceptance of
tobacco usage, tobacco control actions and other factors;
- the risks associated with the various U.S. and foreign laws and
regulations to which we are subject due to our international
business operations;
- the risks concerning a challenge to our tax positions, an
increase in the income tax rate or other changes to federal or
state tax laws;
- the risks associated with legal and regulatory requirements
related to climate change and other environmental sustainability
matters;
- disruption and uncertainty in the credit and capital markets,
including risk of losing access to these markets;
- a downgrade or potential downgrade of our credit ratings;
- our inability to attract investors due to increasing investor
expectations of our performance relating to environmental, social
and governance factors;
- the failure of our, or our key service providers’ or key
suppliers’, information systems to function as intended, or
cyber-attacks or security breaches;
- our failure to comply with personal data protection and privacy
laws;
- the risk that the expected benefits of our investment in ABI
may not materialize in the expected manner or timeframe or at all,
including due to foreign currency exchange rates; ABI’s business
results; ABI’s share price, impairment losses on the value of our
investment, our incurrence of additional tax liabilities related to
our investment in ABI and potential reductions in the number of
directors that we can have appointed to the ABI board of
directors;
- the risks related to the FTC’s challenge with respect to our
former investment in JUUL, which, if successful, could result in a
broad range of resolutions, as well as the outcome of certain other
related putative class actions; and
- the risks associated with our investment in Cronos, including
legal, regulatory and reputational risks and the risk that the
expected benefits of the transaction may not materialize in the
expected timeframe or at all.
You should understand that it is not possible to predict or
identify all factors and risks. Consequently, you should not
consider the foregoing list complete. We do not undertake to update
any forward-looking statement that we may make from time to time
except as required by applicable law. All subsequent written and
oral forward-looking statements attributable to Altria or any
person acting on our behalf are expressly qualified in their
entirety by the cautionary statements referenced above.
Schedule 1
ALTRIA GROUP, INC.
and Subsidiaries
Consolidated Statements of
Earnings
For the Quarters Ended March
31,
(dollars in millions, except per
share data)
(Unaudited)
2023
2022
% Change
Net revenues
$
5,719
$
5,892
(2.9
)%
Cost of sales 1
1,434
1,446
Excise taxes on products 1
956
1,073
Gross profit
3,329
3,373
(1.3
)%
Marketing, administration and research
costs
419
412
Operating companies income
2,910
2,961
(1.7
)%
Amortization of intangibles
18
17
General corporate expenses
135
60
Operating income
2,757
2,884
(4.4
)%
Interest and other debt expense, net
229
281
Net periodic benefit income, excluding
service cost
(31
)
(46
)
(Income) losses from investments in equity
securities 1
80
(34
)
Loss on Cronos-related financial
instruments
—
10
Earnings before income taxes
2,479
2,673
(7.3
)%
Provision for income taxes
692
714
Net earnings
$
1,787
$
1,959
(8.8
)%
Per share data:
Diluted earnings per share
$
1.00
$
1.08
(7.4
)%
Weighted-average diluted shares
outstanding
1,786
1,818
(1.8
)%
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 investments in
equity securities is shown in Schedule 3.
Schedule 2
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data
For the Quarters Ended March
31,
(dollars in millions)
(Unaudited)
Net Revenues
Smokeable
Products
Oral
Tobacco
Products
All Other
Total
2023
$
5,090
$
628
$
1
$
5,719
2022
5,265
613
14
5,892
% Change
(3.3
)%
2.4
%
(92.9
)%
(2.9
)%
Reconciliation:
For the quarter ended March 31,
2022
$
5,265
$
613
$
14
$
5,892
Operations
(175
)
15
(13
)
(173
)
For the quarter ended March 31,
2023
$
5,090
$
628
$
1
$
5,719
Operating Companies Income
(Loss)
Smokeable
Products
Oral
Tobacco
Products
All Other
Total
2023
$
2,503
$
416
$
(9
)
2,910
2022
2,559
407
(5
)
2,961
% Change
(2.2
)%
2.2
%
(80.0
)%
(1.7
)%
Reconciliation:
For the quarter ended March 31,
2022
$
2,559
$
407
$
(5
)
$
2,961
NPM Adjustment Items - 2022
(60
)
—
—
(60
)
Tobacco and health and certain other
litigation items - 2022
12
—
—
12
(48
)
—
—
(48
)
Tobacco and health and certain other
litigation items - 2023
(12
)
—
—
(12
)
(12
)
—
—
(12
)
Operations
4
9
(4
)
9
For the quarter ended March 31,
2023
$
2,503
$
416
$
(9
)
$
2,910
Schedule 3
ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data
(dollars in millions)
(Unaudited)
For the Quarters Ended
March 31,
2023
2022
The segment detail of excise taxes on
products sold is as follows:
Smokeable products
$
928
$
1,044
Oral tobacco products
28
29
$
956
$
1,073
The segment detail of charges for
resolution expenses related to state settlement agreements included
in cost of sales is as follows:
Smokeable products
$
894
$
879
Oral tobacco products
3
2
$
897
$
881
The segment detail of FDA user fees
included in cost of sales is as follows:
Smokeable products
$
63
$
68
Oral tobacco products
1
1
$
64
$
69
The detail of (income) losses from
investments in equity securities is as follows:
ABI
$
(205
)
$
(200
)
Cronos
35
66
JUUL
250
100
$
80
$
(34
)
Schedule 4
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings
Per Share
For the Quarters Ended March
31,
(dollars in millions, except per
share data)
(Unaudited)
Net Earnings
Diluted EPS
2023 Net Earnings
$
1,787
$
1.00
2022 Net Earnings
$
1,959
$
1.08
% Change
(8.8
)%
(7.4
)%
Reconciliation:
2022 Net Earnings
$
1,959
$
1.08
2022 NPM Adjustment Items
(45
)
(0.02
)
2022 Acquisition and disposition-related
items
5
—
2022 Tobacco and health and certain other
litigation items
9
—
2022 JUUL changes in fair value
100
0.05
2022 ABI-related special items
(47
)
(0.02
)
2022 Cronos-related special items
61
0.03
2022 Income tax items
5
—
Subtotal 2022 special items
88
0.04
2023 Acquisition and disposition-related
items
12
—
2023 Tobacco and health and certain other
litigation items
(84
)
(0.04
)
2023 Loss on disposition of JUUL equity
securities
(250
)
(0.14
)
2023 ABI-related special items
20
0.01
2023 Cronos-related special items
(26
)
(0.01
)
2023 Income tax items
(3
)
—
Subtotal 2023 special items
(331
)
(0.18
)
Fewer shares outstanding
—
0.02
Change in tax rate
4
—
Operations
67
0.04
2023 Net Earnings
$
1,787
$
1.00
Schedule 5
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and
non-GAAP Measures
For the Quarters Ended March
31,
(dollars in millions, except per
share data)
(Unaudited)
Earnings
before Income
Taxes
Provision
for Income
Taxes
Net
Earnings
Diluted
EPS
2023 Reported
$
2,479
$
692
$
1,787
$
1.00
Acquisition and disposition-related
items
(17
)
(5
)
(12
)
—
Tobacco and health and certain other
litigation items
111
27
84
0.04
Loss on disposition of JUUL equity
securities
250
—
250
0.14
ABI-related special items
(25
)
(5
)
(20
)
(0.01
)
Cronos-related special items
26
—
26
0.01
Income tax items
—
(3
)
3
—
2023 Adjusted for Special Items
$
2,824
$
706
$
2,118
$
1.18
2022 Reported
$
2,673
$
714
$
1,959
$
1.08
NPM Adjustment Items
(60
)
(15
)
(45
)
(0.02
)
Acquisition and disposition-related
items
7
2
5
—
Tobacco and health and certain other
litigation items
12
3
9
—
JUUL changes in fair value
100
—
100
0.05
ABI-related special items
(59
)
(12
)
(47
)
(0.02
)
Cronos-related special items
61
—
61
0.03
Income tax items
—
(5
)
5
—
2022 Adjusted for Special Items
$
2,734
$
687
$
2,047
$
1.12
2023 Reported Net Earnings
$
1,787
$
1.00
2022 Reported Net Earnings
$
1,959
$
1.08
% Change
(8.8
)%
(7.4
)%
2023 Net Earnings Adjusted for Special
Items
$
2,118
$
1.18
2022 Net Earnings Adjusted for Special
Items
$
2,047
$
1.12
% Change
3.5
%
5.4
%
Schedule 6
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and
non-GAAP Measures
For the Year Ended December 31,
2022
(dollars in millions, except per
share data)
(Unaudited)
Earnings
before Income
Taxes
Provision
for Income
Taxes
Net
Earnings
Diluted
EPS
2022 Reported
$
7,389
$
1,625
$
5,764
$
3.19
NPM Adjustment Items
(68
)
(17
)
(51
)
(0.03
)
Acquisition and disposition-related costs
items
11
2
9
—
Tobacco and health and certain other
litigation items
131
33
98
0.05
JUUL changes in fair value
1,455
—
1,455
0.81
ABI-related special items
2,544
534
2,010
1.12
Cronos-related special items
186
—
186
0.10
Income tax items
—
729
(729
)
(0.40
)
2022 Adjusted for Special Items
$
11,648
$
2,906
$
8,742
$
4.84
Schedule 7
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Consolidated Balance
Sheets
(dollars in millions)
(Unaudited)
March 31, 2023
December 31, 2022
Assets
Cash and cash equivalents
$
3,913
$
4,030
Receivable from the sale of IQOS System
commercialization rights
1,746
1,721
Inventories
1,252
1,180
Other current assets
241
289
Property, plant and equipment, net
1,593
1,608
Goodwill and other intangible assets,
net
17,543
17,561
Investments in equity securities
9,559
9,600
Other long-term assets
979
965
Total assets
$
36,826
$
36,954
Liabilities and
Stockholders’ Equity (Deficit)
Current portion of long-term debt
$
1,339
$
1,556
Accrued settlement charges
3,820
2,925
Other current liabilities
3,987
4,135
Long-term debt
24,048
25,124
Deferred income taxes
2,735
2,897
Accrued pension costs
128
133
Accrued postretirement health care
costs
1,086
1,083
Deferred gain from the sale of IQOS System
commercialization rights
2,700
2,700
Other long-term liabilities
809
324
Total liabilities
40,652
40,877
Total stockholders’ equity (deficit)
(3,876
)
(3,973
)
Noncontrolling interest
50
50
Total liabilities and stockholders’
equity (deficit)
$
36,826
$
36,954
Total debt
$
25,387
$
26,680
Schedule 8
ALTRIA GROUP, INC.
and Subsidiaries
Supplemental Financial Data for
Special Items
For the Quarters Ended March
31,
(dollars in millions)
(Unaudited)
Cost of
Sales
Marketing,
administration
and research
costs
General
corporate
expenses
Interest and
other debt
(income)
expense, net
(Income) losses
from
investments in
equity securities
Loss on
Cronos-related
financial
instruments
2023 Special Items - (Income)
Expense
Acquisition and disposition-related
items
$
—
$
—
$
3
$
(20
)
$
—
$
—
Tobacco and health and certain other
litigation items
—
12
98
1
—
—
Loss on disposition of JUUL equity
securities
—
—
—
—
250
—
ABI-related special items
—
—
—
—
(25
)
—
Cronos-related special items
—
—
—
—
26
—
2022 Special Items - (Income)
Expense
NPM Adjustment Items
$
(60
)
$
—
$
—
$
—
$
—
$
—
Acquisition and disposition-related
items
—
—
7
—
—
—
Tobacco and health and certain other
litigation items
—
12
—
—
—
—
JUUL changes in fair value
—
—
—
—
100
—
ABI-related special items
—
—
—
—
(59
)
—
Cronos-related special items
—
—
—
—
51
10
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
version on businesswire.com: https://www.businesswire.com/news/home/20230426005578/en/
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